Rachel Reeves comes under pressure after UK unemployment climbs to 5.2 per cent marking highest rate since 2021

Labour is under renewed scrutiny today as the latest official figures show the UK’s unemployment rate climbing to a five-year high.

Rachel Reeves, the shadow chancellor, is facing questions about whether the party’s economic policies are resonating amid evidence of slowing job growth.

The Office for National Statistics (ONS) reported that unemployment reached 5.2% in the three months to December, up from 5.1% in the previous quarter.

This marks the highest rate since early 2021 and is the most elevated outside the pandemic period in over a decade.

Economists had widely expected the figure to remain steady at 5.1%, making this a notable deviation from predictions.

Job Losses and Payroll Declines Paint a Stark Picture

Beyond the headline unemployment rate, payroll numbers also tell a worrying story.

Over the past year, the UK saw 134,000 fewer people on payrolls, highlighting that job losses aren’t confined to any single sector.

These figures follow last week’s weak GDP data, underlining broader stagnation in the economy.

Conservative voices have been quick to respond.

Andrew Griffith, the Tory shadow business secretary, slammed the Labour approach, calling the government a “zombie administration” and arguing that policies such as Labour’s Jobs Tax, employment rights legislation, and economic uncertainty are discouraging hiring.

He warned that these trends risk creating a “jobless generation” if left unchecked.

Wages and Inflation: A Mixed Bag

The ONS figures also revealed that wage growth remains fragile.

Regular pay increases slowed to 4.2% in the three months to December, down from a revised 4.4% in November.

After adjusting for inflation using the Consumer Prices Index, real wage growth was only 0.8%, meaning workers’ earnings are still under pressure despite nominal rises.

Yet there was a silver lining. Job vacancies in the UK rose slightly, reaching 726,000 in the three months to January, an increase of 2,000 from the previous quarter.

Liz McKeown, ONS director of economic statistics, highlighted that more unemployed people are actively searching for work, although the number of job seekers per vacancy has hit a post-pandemic high, reflecting tougher competition in the labour market.

Redundancies and Hiring Challenges

Alongside rising unemployment, redundancies are trending upward, signalling that businesses are cautious about expanding payrolls.

Government ministers stress that measures are being taken to encourage employment.

Health minister Stephen Kinnock defended the administration’s record, pointing to the creation of around 440,000 new jobs last year and investments in apprenticeships and schemes aimed at returning people to work.

He also noted that the government inherited difficult economic conditions in July 2024, framing the challenges as a longer-term recovery effort.

What’s Next?

Looking ahead, the next few months could be pivotal for the UK job market.

Analysts will be watching the impact of Labour’s policies on hiring, wage growth, and redundancy trends.

Businesses will also face pressure to balance costs with labour demand, while policymakers need to decide whether further intervention is required to prevent a deeper slowdown.

Upcoming GDP and employment reports will likely shape the narrative around both economic health and Labour’s credibility on growth.

Summary

Unemployment in the UK has risen to 5.2%, marking a five-year high and sparking renewed scrutiny of Labour’s economic strategy.

Payrolls have fallen by 134,000 over the past year, wage growth is slowing, and redundancies are increasing.

Job vacancies show minor growth, but the number of unemployed per available role remains high.

Ministers stress active measures to support employment, while opposition voices warn that current policies are stifling hiring.

The coming months will be critical for the government to demonstrate that it can steer the economy toward recovery.