UK reports biggest monthly fall in jobs — unemployment spikes to 5% – Firstpost

Britain’s labour market is beginning to show visible cracks from the Iran war-triggered energy shock, with unemployment unexpectedly rising to 5 per cent and payroll numbers recording their steepest monthly fall since records began.

Fresh data released by the UK’s Office for National Statistics (ONS) on Tuesday showed the unemployment rate rose from 4.9 per cent to 5 per cent in the three months to March, even as vacancies dropped to their lowest level in five years amid mounting pressure on businesses from soaring fuel and input costs.

The figures offer the clearest indication yet of how the conflict in West Asia is feeding into the British economy through higher oil and gas prices, weakening hiring demand and squeezing wages.

More worryingly for policymakers, payroll employment fell by 100,000 in April — the biggest monthly decline since the current series started in 2014 — after a fall of 28,000 in March.

Vacancies also declined sharply by 28,000 to 705,000 between February and April, marking the weakest level since April 2021. Sectors such as hospitality and retail, which are highly sensitive to consumer demand and operating costs, were among the worst hit.

Liz McKeown, director of economic statistics at the ONS, said the data pointed to a labour market that “remains soft”.

“Vacancies are at their lowest level in five years and unemployment is higher than a year ago,” McKeown said, adding that lower-paying sectors including hospitality and retail had seen some of the steepest falls in both vacancies and payroll numbers over recent months.

The Iran war, which began on February 28, has sent global energy markets into turmoil after the effective closure of the Strait of Hormuz — a key artery for global oil and gas shipments. Britain, already grappling with weak growth and sticky inflation, is now facing the prospect of a broader economic slowdown driven by higher household costs and weakening business sentiment.

The pressure is also beginning to show up in wages.

Average regular earnings growth excluding bonuses slowed to 3.4 per cent in the January-March quarter, down from 3.6 per cent earlier and the weakest pace since late 2020. After adjusting for inflation, real wages rose just 0.3 per cent, underlining how rising prices are eroding workers’ purchasing power.

Including bonuses, total pay growth came in at 4.1 per cent.

The weakening jobs data comes even as the broader UK economy has shown some resilience so far. Official GDP figures released last week showed the economy
expanded 0.3 per cent in March and 0.6 per cent in the first quarter of 2026.

That stronger-than-expected growth prompted the International Monetary Fund to raise its UK growth forecast for 2026 from 0.8 per cent to 1 per cent, citing Britain’s “strong prewar momentum”.

Still, the outlook remains fragile.

The Bank of England expects unemployment to rise further to 5.1 per cent later this year and potentially climb as high as 5.6 per cent by 2027 if the energy shock linked to the Iran conflict continues to weigh on the economy.