Younger people are bearing the brunt of the Chancellor’s hike in labour costs, according to the latest official data.
Unemployment rose over the summer, with school leavers and graduates accounting largely for the increase as employers hold off on hiring new talent.
The UK unemployment rate was 4.8% in August, a slight increase from 4.7% in July.
The estimated number of vacancies in the UK also fell by 9,000, the 39th consecutive period where job posting numbers have fallen.
Liz McKeown, director of economic statistics at the ONS, said: “After a long period of weak hiring activity, there are signs that the falls we have seen in both payroll numbers and vacancies are now levelling off.
“We see different patterns across the age ranges with record numbers of over 65s in work, while the increase in unemployment was driven mostly by younger people.”
The ONS has said the unemployment figures should be treated with caution and it is taking additional steps to address concerns about the quality of the data.
However, it adds to pressure on Rachel Reeves ahead of the Budget after her £20bn increase in employers’ national insurance contributions (NICs) and in wages for the low paid cost businesses £20bn and led to a slowing of recruitment.
Professor Joe Nellis, an economic adviser at accountancy firm MHA, said: “The increase in the minimum wage and employer NICs have made it difficult for businesses to invest in young talent, and we are seeing this reflected in the high levels of youth unemployment.”
Ben Harrison, director the Work Foundation, said: “The job market continues to be very challenging for younger workers. Over one in ten young people aged 18-24 year old (12%) are unemployed, with 112,000 stuck long-term unemployed for more than 12 months. This has risen by five percentage points on the year and provides a major concern for policymakers.
“Ministers must learn from previous attempts to tackle long-term youth unemployment and ensure they support – not sanction – young people into real, paid opportunities and give participants agency to make decisions that benefit their future careers and health.”
The retail and hospitality sectors have widely blamed the government for adding costs on businesses, with the incoming Employment Rights Bill threatening to add to its costs.
Chris Beauchamp, chief market analyst at IG, said: ” “This morning’s data provides little in the way of good news for the struggling UK economy, and puts more pressure on the Bank of England and the government to act to provide more support.
“Sterling looks at the mercy of continued US dollar strength, both from a data outlook and as short positioning in the greenback continues to unwind.”
Shadow business secretary Andrew Griffith said: “Rising unemployment is a disaster for the economy and a tragedy for affected families.
“The growing crisis of young people not being able to find work is a prime example of Labour taking our country in the wrong direction.
“It beggars believe that the government are making things worse with their ‘back to the seventies’ employment legislation which every single business group opposes.”
Regular pay (excluding bonuses) in the three months to August rose by 4.7%, down from 4.8% in the previous quarter and the slowest growth since May 2022.
Public sector pay, lifted by recent settlements in education and health, remains stronger but the overall trend points to cooling wage pressures.
The ONS will publish inflation data for September next week. Forecasters believe price growth will rise by to 4%, double the Bank’s target.
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