UK jobs market was in a fragile state – even before Iran war threatened recovery
Summary
The UK jobs market showed a small drop in unemployment to 4.9% by February, but signs of weakness remain, such as fewer people working and weak wage growth. The conflict in Iran and rising energy prices may make the economic situation more difficult, and the Bank of England is cautious about raising interest rates aggressively.Key Facts
- UK unemployment fell from 5.2% to 4.9% in the three months to February.
- Economic inactivity increased, meaning more people are not looking for work.
- The number of payrolled jobs declined by 65,000 in March compared to a year earlier.
- Annual pay growth slowed to 3.8%, the weakest since autumn 2020.
- Real wage growth, after adjusting for inflation, was only 0.7%, the lowest since mid-2023.
- Rising energy prices and the Iran conflict threaten the UK’s economic recovery.
- Economists expect unemployment to rise through 2026 due to economic slowdown.
- The Bank of England may hold interest rates steady rather than raise them aggressively because wage growth remains weak.
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