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Tuesday, Jul 01, 2025

UK Unemployment Rises to 4.2%: Jobs Market Slows Down, Spurring Rate Cut Speculation

The UK jobs market experienced a slowdown, leading to an increase in unemployment.
The unemployment rate rose to 4.2% in the period between December and February, marking a six-month high.

The number of people with jobs also decreased, and the economically inactive population increased.

Economists believe this data may prompt the Bank of England to reduce interest rates during the summer.

Paul Dales, chief UK economist at Capital Economics, stated that with employment declining and the unemployment rate rising, wage growth is expected to decrease further in the upcoming months.

The Office for National Statistics (ONS) reported an unexpected increase in the UK's unemployment rate to 4% in the three months to February, surpassing economists' forecasts.

The number of unemployed people rose to 1.4 million.

However, average wage growth, excluding bonuses, only decreased slightly from 6.1% to 6%.

Economist Yael Selfin of KPMG UK believes this data keeps the Bank of England on track for a summer interest rate cut due to easing pressure in the labor market.

Real wages increased by 1.9% in the three months to February 2023, marking the highest growth since September 2021.

Chancellor Jeremy Hunt commended this development and noted that recent National Insurance cuts would further benefit employees and self-employed individuals.

However, a freeze on income tax thresholds until 2028 may result in some workers paying more tax as their wages rise.
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