UK unemployment rises to 4.4%, suggests it’s time for a rate cut: here’s what it means  

This morning, the United Kingdom’s Office for National Statistics (ONS) released the nation’s latest monthly employment and unemployment figures for May.

Unemployment rises in the UK

The news was worse than expected by many analysts, with unemployment rising from 4.3% to 4.4%, an increase of 0.5 percentage points.

Broadly, analysts had anticipated unemployment to remain stable at 4.3%, the same as it had been the month before. But the reality was a little different.

UK labour report figures today

The employment numbers for the same period were little better.

“This month’s figures continue to show signs that the labour market may be cooling, with the number of vacancies still falling and unemployment rising,” said the ONS this morning.

Payrolled employees in the UK decreased by 36,000 (0.1%) between March and April 2024, but rose by 201,000 (0.7%) between April 2023 and April 2024. The early estimate of payrolled employees for May 2024 decreased by 3,000 jobs (0%) on the month but increased by 167,000 (0.6%) on the year, to 30.3 million. 

Furthermore, the ONS said that the UK economic inactivity rate for people aged 16 to 64 years was estimated at 22.3% in February to April 2024, above estimates of a year ago, and increased in the latest quarter.

More bad news from latest jobs report

ONS is not the only authority recording challenges for the UK jobs market.

The latest release of the ‘KPMG and REC UK Report on Jobs’, a monthly survey compiled by S&P Global that looks at the employment landscape in the United Kingdom with both the Recruitment and Employment Confederation (REC) and KPMG, echoed this.

According to the report, the number of people employed in new jobs in the UK, both temporary and permanent, have declined every single month for more than 18 months now.

There was a further fall in the number of permanent staff appointments made by UK recruitment consultants during April. Placements have now fallen in each month since October 2022, although the rate of decline in April was noticeably slower, easing to its weakest since June 2023.”

BoE rate cuts soon?

All this certainly seems to suggest that the tide could turn in the economy’s favour, if a more hiring-friendly interest rate were to come into play.

“UK CEOs continue to grapple with the Bank’s hawkish stance on interest rates, and will no doubt hope April’s survey data is another marker in the sand on the journey towards a summer cut,” said Jon Holt, Chief Executive and Senior Partner of KPMG in the UK.

The Bank of England (BoE) makes its next interest rate decision on June 20th. It is expected that the BoE will announce their first rate cut sometime this summer.