Unemployment becomes 'threat to economic growth' after reaching 13-year high

ONS figures present headache for Bank of England governor Andrew Bailey Photo: Chris Ratcliffe/Bloomberg

Unemployment is now a 'threat'. economists warned after official data showed economic activity rose to a new 13-year high.

The number of adults who are unemployed and not looking for work rose to more than 9.4 million in the three months to April, according to the Office for National Statistics (ONS), the highest since 2011, following the financial crisis.

Of those considered inactive, 2.83 million blamed long-term illness — a record figure.

Employment fell by 139,000 in the three months to April, while unemployment rose by almost that much ​​the same size. More than 1.5 million people are currently unemployed, the highest since 2021.

Tony Wilson, director of the Institute for Employment Research, said the proportion of young people aged 16 to 64 not participating in the workforce was rising. the use of force became a serious threat to the economy.

He said: “When employment stops growing, so does the economy. This parliament has seen the biggest increase in economic activity and the biggest decline in the labor force since records began in 1971.

“And this is simply not happening in other countries, with the UK almost leading the only advanced economy where employment levels have fallen since the pandemic.”

Alexandra Hall-Chen from the Institute of Directors said almost half of businesses are struggling struggling to find the staff they need, in part because so many people have dropped out of the job market.

She said: “As economic activity continues to rise, both in the quarter and throughout the year, it threatens to exacerbate these challenges for businesses.

“Stabilizing rising costs and getting people back to work must be the focus of the next government. Without action to increase domestic labor supply, strong economic growth will be virtually impossible.»

ONS data also showed that wage growth was faster than expected last quarter, dealing a blow to hopes that The Bank of England could start cutting interest rates this summer.

The latest data shows average regular earnings. It has risen 6% over the past year, thanks in part to a nearly 10% increase in the minimum wage.

Economists said pressure on wages strengthened the view that the Bank of England will wait until after the election before cutting interest rates from the current 16-year high of 5. 25 percent.

The Bank's Monetary Policy Committee, chaired by Andrew Bailey, will meet next week to decide whether to cut borrowing costs.

Jake Finney, an economist at PwC UK, said the latest ONS labor market data «presents a headache for the Bank of England», while Simon French of Panmure Gordon said wage growth remains «too hot» to reduce borrowing costs.< /p>

Thomas Pugh, RSM economist, added: “Strong wage growth will give the hawks on the committee some ammunition, and the combination of persistent inflation and the election means there is little chance of a rate cut next week.”

Liz Kendall, Labour's shadow work and pensions minister, on Tuesday accused the Conservatives of a «total failure» to tackle the unemployment crisis.< /p>

Ms Kendall said: “Under Rishi Sunak's leadership, record numbers of people have been left out of work due to long-term illness, with dire consequences for them, businesses and taxpayers, and we remain the only G7 country whose employment levels still remain has not returned to pre-pandemic levels.”

The Conservative manifesto, released on Tuesday, said the party wants to “tighten the way the benefits system assesses work ability.”

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“We will change assessments from September 2025 so that people with more moderate mental health problems or mobility problems who could potentially participate in the world of work receive tailored support rather than being written off on benefits,” it says. said.