UK Unemployment Hits Highest Rate for Nearly Five Years
Unemployment in the UK has reached its highest level in nearly five years, according to official figures released recently. The unemployment rate rose to 5.2% for the three months ending in December 2025, up from 5.1% in the previous three months, as reported by the Office for National Statistics (ONS).
Rising Youth Unemployment
The increase in the unemployment rate is particularly concerning for young people. Those aged 16 to 24 have seen their unemployment rate surge to 16.1%, marking the highest level in over a decade. This alarming trend highlights the difficulties young jobseekers face in a challenging labor market.
– Wage Growth vs. Inflation: For those currently employed, wages are still growing faster than inflation, but this growth rate is decelerating.
– Hiring Slowdown: Many businesses are hesitating to hire new employees. Key factors contributing to this slowdown include:
– Increased employer National Insurance contributions.
– A rise in the minimum wage.
Government Response to Unemployment
In light of these developments, Work and Pensions Secretary Pat McFadden emphasized the need for more initiatives to help people secure jobs, particularly focusing on tackling youth unemployment.
– Support for Young Workers: The government aims to streamline pathways for young individuals to find and acquire apprenticeships, making entry into the job market easier.
– Opposition Reaction: The Conservative party, however, has criticized Labour’s handling of the situation, attributing the unprecedented series of monthly unemployment increases to poor decision-making and economic mismanagement.
Shadow Work and Pensions Secretary Helen Whately voiced her concerns, stating that young people are disproportionately affected by changes that make entry-level roles harder to obtain. “By raising hiring costs, Labour is effectively shutting out school leavers and graduates from the job market,” she argued.
The Impact on Young Jobseekers
Lucy Gabb, a recent Cambridge graduate, encapsulates the struggles many young job seekers face. Having graduated in July 2025 with a degree in French, Gabb has been searching for publishing roles while working in a café.
– Job Search Challenges: Despite applying for over 50 positions, she has only secured one face-to-face interview. Many applications receive no response or result in swift rejections.
– Feelings of Despair: “The job search can be soul-destroying when you’ve invested so much time in your education without seeing results,” she shared.
Sector Trends: Jobs and Wages
The ONS data reveals a significant drop in jobs within the retail and wholesale sector, which has lost 65,000 positions since January last year. Conversely, health and social care experienced a notable increase, adding 39,000 jobs over the same timeframe.
– Sector Transitions: Danni Hewson, a financial analyst at AJ Bell, points out that many individuals leaving retail may transition to healthcare roles, which offer greater employment opportunities for women.
– AI Concerns: Hewson also raised concerns regarding the potential impact of increased investment in artificial intelligence, suggesting it may lead to a shortage of entry-level jobs.
Economic Outlook
As average annual wage growth slowed to 4.2% in the three months ending December, down from 4.4% the previous month, experts believe this decline could influence the Bank of England’s interest rate decisions.
– Interest Rate Projections: Current inflation stands at 3.4%, exceeding the government’s target of 2%. Economists like Paul Dales from Capital Economics suggest that slowing wage growth could prompt the Bank of England to consider interest rate cuts in its upcoming March meeting.
In conclusion, the rise in UK unemployment to its highest rate in nearly five years underscores significant challenges, particularly for young job seekers. While government measures are being put in place to address youth unemployment, the complexities of wage growth and sector-specific job losses continue to shape the employment landscape. The ongoing dialogue around these issues will be crucial as stakeholders seek strategies to foster a more robust job market for all.