One in seven young people now out of work as UK jobs market weakens further

Britain's labour market, long the resilient bright spot of an otherwise sluggish economy, is showing unmistakable signs of strain. The latest figures from the Office for National Statistics show the headline unemployment rate has risen to 5.0%, with around 1.81 million people aged 16 and over now out of work. The number of unemployed people has jumped by 192,000 over the past year, pushing the jobless rate up from 4.5%.

The most alarming detail lies in the data on young people. Youth unemployment has climbed to 14.7%, meaning roughly one in seven 16-to-24-year-olds who want a job cannot find one. That is the highest rate since late 2014, and more than one in five young jobseekers have now been out of work for over a year, the kind of long-term joblessness that economists fear can leave lasting scars.

Taken together, the figures paint a picture of an economy quietly shedding jobs even as the headline growth numbers hold up, a pattern that should worry policymakers more than the soothing top-line statistics might suggest.

A market that is cooling from the bottom up

The weakness is not confined to the young. Estimates of payrolled employees fell by 104,000, or 0.3%, over the year to March, and job vacancies have slipped to 705,000 in the February-to-April window, now below their pre-pandemic level. When vacancies fall below where they sat before the COVID disruption, it is a reliable sign that employers have grown cautious about hiring.

Employers blame a combination of weak demand, higher employment costs and uncertainty about the economic outlook. Entry-level roles, apprenticeships and the hospitality and retail jobs that traditionally give young people their first foothold have been among the hardest hit, which helps explain why the youth figures have deteriorated faster than the overall rate.

“When firms get nervous they stop hiring before they start firing, and the people who feel that first are the ones trying to get on the ladder. A youth unemployment rate near fifteen per cent is a flashing warning light.”

— A labour market economist

The regional and human picture

The pain is unevenly spread. London continues to record the highest regional unemployment rate in the UK at 7.3%, a striking statistic for the country's economic engine and a reminder that the capital's high cost of living can coexist with a slack jobs market. The claimant count, a measure of people receiving unemployment-related benefits, rose on the month to around 1.7 million.

Behind the percentages are real consequences. Long spells of youth unemployment are associated with lower lifetime earnings, weaker mental health and a higher chance of repeated joblessness later in life, a phenomenon economists call scarring. The longer the current softness persists, the greater the risk that today's struggling school and university leavers carry the cost for years.

• Headline unemployment has risen to 5.0%, up from 4.5% a year earlier.
• Around 1.81 million people aged 16 and over are now unemployed, an increase of 192,000 over the year.
• Youth unemployment stands at 14.7%, the highest since late 2014.
• More than one in five young jobseekers have been out of work for over a year.
• Payrolled employment fell by 104,000 over the year to March, and vacancies dropped to 705,000.
• London has the highest regional unemployment rate at 7.3%.

Background

For most of the post-pandemic period the UK labour market defied expectations, with unemployment hovering near historic lows even as growth stagnated. That resilience gave the Bank of England and the Treasury some comfort that the economy could withstand higher interest rates. The recent turn marks a clear break from that pattern and suggests the lagged effects of tighter monetary policy, weaker confidence and rising business costs are finally biting.

Measuring the labour market has itself become harder in recent years, as falling survey response rates have forced the ONS to lean more heavily on tax and benefits data. That has prompted some economists to treat the precise figures with caution, while still accepting the broad direction of travel, which is unambiguously towards a weaker market.

What it means

A softening jobs market complicates the picture for rate-setters, who must weigh rising inflation against an economy that is plainly losing momentum. For the government, the youth figures in particular create political pressure to act, whether through targeted support, training schemes or incentives for employers to hire young workers. For the rest of us, the message is that the labour market's long run of strength has ended, and that the cost of the slowdown is falling first and hardest on those at the very start of their working lives.