Unemployment in the United Kingdom has risen beyond anticipated levels during the initial quarter of 2023, while wages have concurrently experienced a significant surge, reaching the joint-highest rate ever recorded.

According to the latest report by the Office for National Statistics (ONS), the UK’s unemployment rate soared to 4 percent during the three-month period ending in May, representing a notable increase from the previous three-month period’s rate of 3.8 percent.

Meanwhile, average regular wages during this same period experienced an impressive growth rate of 7.3 percent, matching the rate observed in the preceding three months and reaching the highest level since records began in 2001.

An increase in wages

This significant increase in wages, a key indicator of economic performance, mirrors the record-breaking growth rate achieved in the labour market’s history. However, alongside this positive development, there are indications that the inflationary pressures within the labour market may be easing, potentially providing some relief for the Bank of England.

The ONS report revealed that the 7.3 percent surge in basic earnings observed in the three months leading up to May aligns with the figure recorded in the three months leading up to April. Moreover, the reading for the second quarter of 2021 was also revised upwards from an initial estimate of 7.2 percent, further solidifying the robustness of wage growth.

These trends in unemployment and wages signal both challenges and opportunities for the UK economy. The higher-than-expected unemployment rate reflects ongoing labour market uncertainties, potentially stemming from various factors such as technological advancements and economic fluctuations.

However, the remarkable wage growth provides a ray of hope, indicating improved financial prospects for workers across the country.

As the labour market demonstrates signs of stabilization, the Bank of England may find some respite in the prospect of reduced inflationary pressures. These developments may pave the way for more balanced economic conditions, boosting consumer confidence and overall economic growth.

Analysts will continue to closely monitor these trends and assess the implications for the broader economy, providing insights into the ever-evolving landscape of employment and wages in the United Kingdom. 

Chancellor of the Exchequer, Jeremy Hunt, said:

“Our jobs market is strong with unemployment low by historical standards. But we still have around 1 million job vacancies, pushing up inflation even further.

“Our labour market reforms – including expanding free childcare next year – will help to build the high wage, high growth, low inflation economy we all want to see.”

Is there a turn in the red-hot jobs market?

David Morel, CEO of Tiger Recruitment, says: “Figures released today by the Office for National Statistics show a healthy and robust UK jobs market, but that it is a misleading picture. Job vacancies dropped for the 12th consecutive month, which is the longest sustained fall in vacancies since 2008 to 2009. At the same time, the unemployment rate rose to pre-pandemic levels.

“A notable change is the increase in the number of unemployed individuals per vacancy, which rose from 1.1 to 1.3. While still low by historical standards, this increase reflects a slight easing of the employment market, which Tiger Recruitment has experienced first-hand. Employers are scrutinising non-essential hiring, sometimes shrinking the number of job opportunities available. Likewise, employees are more cautious about moving jobs, with many choosing job security over opportunity in a market that has swung back in favour of the employer. We see this stability of the jobs market continuing through the summer months with some brightening expected in Q4.”

Jonathan Boys, labour market economist for the CIPD, the professional body for HR and people development, comments:   

“A familiar pattern is emerging: high nominal pay rises, accompanied by real terms pay cuts due to high inflation. Regular pay grew by 7.3 percent – the highest seen by the ONS since the time series began in 2001. However, real regular pay fell by a modest 0.8 percent. This dynamic will worry the Bank of England who fear a wage-price spiral, but for individuals, it’s cushioning the blow to living standards. 

Today’s figures are typical of the post-pandemic period. Unemployment, though increasing slightly, remains low. One in five people are economically inactive, meaning they are not seeking and available to work, and a large part of the recent increase is due to longterm sickness. The Chancellors last budget was focused on increasing labour supply and there are signs that we are turning the corner here. However, more must be done to help people with health challenges stay in employment or find suitable jobs if they’ve left the labour market. This means a focus on improving access to occupational health support and ensuring more jobs have the flexibility to support those with health conditions.  

Theres been a slight easing of recruitment and retention pressures. Increasing numbers of people are rejoining the labour market this quarter, perhaps in response to the cost-of-living crisis. 

Michael Stull, Director at ManpowerGroup UK, comments on the tight labour market:

“The gradual decline of vacancies overall and slight rise in the unemployment rate to 4.0%, contrasts with a very strong hiring intent that we’re seeing from employers in nearly every sector and across all parts of the UK. It brings home the reality of the talent shortages reported by 80% of UK employers, with skills development now a critical longer-term priority that will help put the economy back on track.

“Added to this, questions continue to be raised over whether people are typically more productive at home or in the workplace as the debate around hybrid-working best practice rumbles on. It’s causing a lot of anxiety for both employers and employees who each have their own ideas about what ‘good’ flexibility should be.

“In such a tight labour market consisting of many workers who are set on pursuing career progression – whether that’s by acquiring new skills, earning more money, or finding the most suitable work-life balance – many businesses are understandably reluctant to draw a line in the sand and risk losing out to competition.  But employers need to be crystal clear about their expectations are, treating their workers as an asset and with convincing and compelling reasons outlined for when employees are expected to be in the workplace.

“Firm and fast decision-making is advised in any case. Speed is a big determinant of success in the current labour market and those organisations that are quicker to assess and interview candidates will gain a significant advantage.”





Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at the University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.