UK sees biggest drop in employed people outside recession ever recorded

12 September 2023 , 11:58

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Unemployment rose between May and July, ONS figures show (Image: Copyright Unknown)

The UK has recorded the biggest drop in people in employment outside of a recession on record, new analysis shows.

Analysts warn rising interest rates are having a chilling effect in the jobs market. Figures released by the Office for National Statistics (ONS) found the unemployment rate is 4.3%, up 0.5 percentage points from the previous quarter.

The UK employment rate is rated at 75.5%, down 0.5 percentage points from earlier this year and 1.1 lower than before the Covid pandemic. Torsten Bell, who heads think tank the Resolution Foundation, posted on Twitter: "The red hot labour market of last year is long gone."

It comes as average wages including bonuses rose by 8.5% in the second quarter of 2023 - leading a bumper state pension rise due to the triple lock protection. Rishi Sunak faces calls to increase benefit payments by the same level amid warnings it would be "wholly unfair" not to do so.

Hannah Slaughter, Senior Economist at the Resolution Foundation, said: “Britain saw the biggest employment fall outside of a recession this summer. This is the clearest sign yet that the Bank of England’s rate rising cycle is starting to cool the jobs market.

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“But while higher unemployment should lead to lower wage growth in the coming months, it certainly hasn’t had that effect yet, with earnings growing at a record pace. The short-term pay boost could end up benefiting pensioners more than workers as it is set to deliver a big permanent boost to the state pension next April. In this context it would be wholly unfair to hold down working-age benefits, especially as poorer households are already set to see their incomes fall next year.”

The foundation says the Government must ensure the benefit rise isn't below the rate of inflation.

Darren Morgan, ONS director of economic statistics, said: "The proportion of people neither working nor looking for a job is slightly up, with more students, as well as the long-term sick reaching yet another record."

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Dave Burke