The UK’s unemployment rate dropped to 4.9% in the three months leading up to February, a decline from 5.2% in the previous three-month period, as reported by the Office for National Statistics. During the same timeframe, average wages increased by 3.6%, slightly lower than the 3.8% growth seen in January, with pay including bonuses rising by 3.8%. These figures exceeded expectations.
These statistics predate the full impact of the economic upheaval from the conflict in the Middle East. Experts caution that the war may drive up inflation, potentially leading to increased unemployment as businesses facing higher costs may reduce hiring. Wage growth averaged 5.2% in the public sector and 3.2% in the private sector.
In contrast, the estimated number of job vacancies decreased in the latest quarter after showing minimal changes since March to May 2025. Early estimates for January to March indicated a 3.9% decrease in job vacancies to 711,000, down by 29,000 compared to the previous quarter, marking the lowest vacancy level since February to April 2021.
Liz McKeown, the ONS Director of Economic Statistics, noted that the number of workers on payroll remained relatively stable, reflecting sluggish hiring trends. Vacancies have decreased to a nearly five-year low, but with falling unemployment, the ratio of vacancies to unemployed individuals has not significantly changed.
Yael Selfin, chief economist at KPMG UK, highlighted that wage growth was slowing before the Middle East conflict, reducing the risk of escalating pay pressures due to higher energy costs. The labor market’s weakened state is limiting workers’ bargaining power, decreasing the likelihood of a wage-price spiral. The Bank of England is expected to maintain interest rates amidst these conditions.
Luke Bartholomew, deputy chief economist at Aberdeen, cautioned that the decline in unemployment reported might not reflect robust hiring trends, as it primarily indicates rising inactivity rather than increased employment. Weaker payrolls data for March, impacted by the conflict, suggest ongoing challenges in the labor market.
These figures precede the release of crucial inflation data by the ONS, expected to show the initial effects of the Middle East conflict in March.