Britain\u2019s official unemployment rate rose to 4.7% in the three months to May, reaching the highest level since June 2021, according to data from the Office for National Statistics released last week.<\/p>\n
Answering precisely why the UK\u2019s job market is cooling is an inexact science, not least because the ONS has had persistent problems with its labour force survey.<\/p>\n
Rises in employers\u2019 national insurance contributions, a new living wage, and cost savings from implementing artificial intelligence are all cited as contributing to businesses\u2019 reluctance to hire. Inflation, elevated interest rates and trade wars may have a hand too.<\/p>\n
So what can we say for certain? First, data shows that vacancy rates, which have fallen for 36 consecutive periods, are now well below pre-pandemic levels. Those vacancies have fallen further and faster in low-paying sectors such as hospitality and retail, suggesting that the increase in employer NICs in April is a factor.<\/p>\n
Second, the slowdown is hitting younger workers harder. Since October 2024, the change in the number of payrolled jobs for people aged 18 to 24 dropped 1.2%, according to calculations from the Resolution Foundation. For the population as a whole it dropped 0.6%.<\/p>\n
Third, wage rises are slowing. Those lucky enough to be in work for the last 12 months saw their wages rise 1.8% on average excluding bonuses. For those who aren\u2019t, the picture is bleak. Only 26% have emergency savings according to Hargreaves Lansdown Savings & Resilience Barometer.<\/p>\n
What about the much-heralded AI jobs armageddon? In a survey by employment researchers LHH of 200,000 workers laid off in 2024, 12.4% cited AI as a factor in their layoffs, while 1.4% said AI directly replaced their role.<\/p>\n
It\u2019s easy to play the blame game \u2013 and companies are doing it too. BT has announced plans to cut up to 55,000 jobs by 2030, with up to a fifth of these reductions coming from automation of roles. Klarna, the payments platform, has been explicit about realising similar efficiencies from AI.<\/p>\n
\u201cWe\u2019re now at a point where many economists are going to have to revisit the blas\u00e9 assumption that AI\u2019s only impact is raising productivity,\u201d says Nye Cominetti at the Resolution Foundation.<\/p>\n