UK Unemployment Rate Drops to 4.9% in Three Months to February

The UK's unemployment rate decreased to 4.9% in the three months to February, as reported by the Office for National Statistics (ONS). This figure was lower than the previous 5.2% and contradicted expectations that it would stay unchanged. The reduction occurred alongside a rise in the number of people not actively seeking employment, who are classified as economically inactive and thus excluded from unemployment statistics.

Liz McKeown, director of economic statistics at the ONS, stated that the increase in inactivity was notable among students choosing not to look for work while studying. The inactivity rate rose to 21% in the December to February period, up from 20.7% previously.

Most of the ONS data was collected before the start of the US-Israeli war with Iran in March, which has caused energy prices to rise.

increased at an annual rate of 3.6% between December and February, marking the weakest growth since late 2020, according to the ONS. This rate still exceeded inflation during the period. Early estimates from the ONS indicated that payrolled employment decreased by 11,000 in March, the first month of the conflict.

Job vacancies fell to 711,000 in the January to March period, the lowest level in nearly five years, the ONS reported. Dean Watson, who runs the Youth Employment Hub in Peterborough, Cambridgeshire, said that lack of confidence, mental health issues, anxiety, and nerves are major barriers for young people aged 16-24 in job searching.

The hub, located at the city's football stadium, provides careers advice and training. A 20-year-old attendee at the hub reported applying for construction roles without success since January and noted that attending has expanded job opportunities, including enrollment in a sales and leadership course.

James Smith, an economist at ING, stated that the unemployment drop was primarily due to increased economic inactivity rather than more people entering work, with a particular impact among students. Yael Selfin, chief economist at KPMG UK, said the labor market showed signs of stabilization in February, consistent with pre-conflict hiring recovery, but added that unemployment may rise in coming months due to higher costs and weaker demand.

The International Monetary Fund (IMF) forecasted last week that the energy shock from the conflict would affect the UK more severely than other advanced economies, revising its UK growth estimate for this year to 0.8% from 1.3%. The UK, as a net energy importer, is vulnerable to sharp energy price increases.

Official data showed the UK economy grew by 0.5% in February, exceeding expectations and indicating momentum before the conflict.