The rate of UK unemployment rose to 4.4% in the three months to November from 4.3% in the three months to October, the Office for National Statistics said, in a fresh blow to Rachel Reeves.
However, the was good news for workers as the UK average regular earnings growth rose to 5.6% in the three months to November and was 3.4% higher after taking Consumer Prices Index inflation into account, the ONS said.
This could be short-lived, warned Alice Haine, personal finance analyst at Bestinvest. She said some businesses were already scaling back on pay rises and hiring more staff in 2025.
She said: “Wage growth was robust in November, but it may dip in December when some employers chose to scrap or reduce Christmas bonuses in reaction to the Chancellor’s new tax measures.
“[They will] batten down the hatches in preparation for the hit coming in April from the increased rate of employer National Insurance and lowering of the wage threshold at which it applies, along with increases to the minimum wage.
Other commentators believe cracks are starting to appear in the UK’s labour market as the full impact of changes announced in Reeves’ October budget starts to impact UK businesses.
Richard Carter, head of fixed interest research at Quilter Cheviot said despite the continued strain of many economic headwinds, the UK labour market had been holding relatively steady.
“However, it appears the cracks are starting to appear. The unemployment rate rose to 4.4% in September to November, surpassing estimates from a year ago and increasing on the last quarter.
“Meanwhile, estimates for payrolled employees in the UK fell by 32,000 between October and November 2024, though they rose by 95,000 year on year.”
He added: “The upcoming changes to employer national insurance contributions are also expected to weigh heavily, and these figures suggest businesses may already be taking decisive action when it comes to hiring to lessen the burden.
“While these latest numbers show the UK is not quite yet in dire straits, it is not far off. The Bank of England faces an incredibly difficult balancing act as we move further into 2025.”
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