UK unemployment rate rises to 3.6% while real wages fall by 3.8% as recession looms, ONS figures reveal

Official figures show average earnings are down 3.8% as UK heads for what is feared to be the longest recession in a century

Britain’s unemployment rate has increased to 3.6% from August to September, while real wages have fallen, official figures show.

It comes as the country heads for what is feared will be the longest recession in a century.

Most economists had expected the unemployment rate to remain unchanged. However, more people dropping out of the workforce and a hike in the proportion of people neither looking for work nor working, increased the unemployment rate from 3.5% to 3.6%.

The Office for National Statistics (ONS) revealed that over half a million working days were lost to strikes in August and September, the highest two-month total in more than a decade. There was also another fall in the number of vacancies, down 46,000 quarter-on-quarter to 1.2 million, as employers increasingly “hold back on recruitment” amid mounting economic gloom.

Official figures showed average earnings, excluding bonuses, were down 3.8% when taking account of Consumer Prices Index (CPI) inflation.

It comes after data revealed last week that the economy shrank by 0.2% in the third quarter, putting the UK on course for a prolonged recession amid the cost of living crisis.

Chancellor Jeremy Hunt insisted that tackling inflation was his “absolute priority” as he prepares to outline the delayed autumn Budget - which is expected to include a raft of tax hikes and spending cuts.

He said: “That guides the difficult decisions on tax and spending we will make on Thursday.Restoring stability and getting debt falling is our only option to reduce inflation and limit interest rate rises.”

More timely data showed the number of payrolled workers increased by 0.2% between September and October to 29.8 million, but these figures are subject to revision.

The wider labour force survey figures show that the number of people in the UK who are unemployed fell by 69,000 to 1.2 million between the second and third quarters. But the number of people in employment also dropped by 52,000 to 32.7 million.

Meanwhile economic inactivity increased by 0.2% quarter on quarter to 21.6%, driven by those aged 16-24 and 35-49 years.

Darren Morgan, director of labour and economic statistics at the ONS, said rising levels of inactivity in the UK since the pandemic has “largely been caused by older workers leaving the labour market altogether, but in the most recent quarter the main contribution has actually come from younger groups”.

He added: “August and September saw well over half a million working days lost to strikes, the highest two-month total in more than a decade, with the vast majority coming from the transport and communications sectors.

“With real earnings continuing to fall, it’s not surprising that employers we survey are telling us most disputes are about pay.”