Britain’s unemployment rate edged down to 4.9% in the three months to April, according to the Office for National Statistics, offering a modest lift to policymakers just hours before the Bank of England announced its latest interest rate decision.
The reading fell from 5% in the previous quarter and came in slightly better than economists’ expectations, which had forecast no change. While the shift was small, it arrives at a time when officials are closely assessing how much slack is emerging in the labour market.
Wage growth figures also surprised on the upside. Regular pay excluding bonuses held steady at 3.4%, above forecasts of 3.2%. When adjusted for inflation, real earnings rose by 0.3%, indicating a slight improvement in household purchasing power. Total pay including bonuses increased by 4.4%, also ahead of expectations.
The data was released just before the Bank of England’s Monetary Policy Committee met to decide whether to adjust interest rates, which currently stand at 3.75%. Policymakers have been cautious in recent months as inflation pressures remain uneven and global energy markets are unsettled.
Labour market conditions are central to the Bank’s thinking. Officials have been monitoring whether higher energy costs linked to geopolitical tensions, including the conflict involving Iran, could feed into stronger wage demands and prolong inflationary pressure.
Work and Pensions Secretary Pat McFadden said the figures showed an additional 400,000 people in employment compared with a year earlier, while acknowledging economic uncertainty linked to global instability. He highlighted government initiatives aimed at expanding youth employment and disability support programmes, including a £2.5 billion Youth Guarantee and the Connect to Work scheme.
However, not all economists interpreted the data as a sign of strength. Independent analyst Julian Jessop pointed to a continued decline in payroll employment, noting that there were 119,000 fewer employees in May compared with the same month last year, and 187,000 fewer than two years ago.
That softer trend is also reflected in rising claimant count figures. The number of people claiming unemployment-related benefits increased by 31,200 in May, exceeding expectations and adding to a revised rise in April.
At the same time, employment overall rose by 100,000 in the three months to April, although this marked a slowdown from the previous period. Economists say this combination of rising employment alongside higher benefit claims reflects a cooling but uneven labour market.
The Institute of Chartered Accountants in England and Wales said businesses are increasingly limiting hiring and restraining wage growth as they face higher energy bills and labour costs. It warned that weaker demand for workers could help contain inflation but also signals a slowing economy.
Some economists cautioned that falling job vacancies and reduced hiring momentum suggest the labour market is losing strength faster than expected. There are concerns that if energy costs remain elevated, unemployment could trend higher in the coming months.
For now, the unemployment rate has moved lower, but analysts say the broader picture remains fragile, with policymakers balancing easing inflation against signs of a weakening jobs market.
