The rate of UK unemployment in the UK has risen to 5% in a blow to Rachel Reeves, according to the new official figures.
The Office for National Statistics (ONS) said the increase occurred in the three months leading up to September.
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That’s the highest rate recorded since the three months up to February 2021 amid the Covid pandemic.
Here’s what you need to know.
What is the 2025 UK unemployment rate?
The ONS revealed today that unemployment rose to 5.0% in the three months to the end of September. That’s up from 4.8% in the previous quarter, and works out to an increase in unemployment to 1.8 million.
We do not know the rate for the whole year yet as the data for October, November and December still need to be collected.
What is the youth unemployment rate?
There’s been an increase in the number of young people who are not employed, in education or in training recently.
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The Resolution Foundation estimates that almost a million (940,000) young people are unemployed – the highest level recorded in a decade, and almost the same number recorded in the after math of the 2008 financial crash.
That’s an increase of 195,000 more young people not working in just two years.
According to the Resolution Foundation, most of these people are economically inactive rather than unemployed, with many pointing to health problems or “other reasons” for not working or studying,
Why has the unemployment rate increased?
Although many analysts had still expected the rate to be around 4.9% ahead of Reeves’ Budget on November 26, the 5% figure was still unexpected.
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Average wage growth had only fallen slightly to 4.6% in the most recent quarter, down from 4.7% compared to the three months leading up to August.
The ONS’s director of economic statistics, Liz McKeown, said: “Taken together, these figures point to a weakening labour market.
“Meanwhile, the unemployment rate is up in the latest quarter to a post pandemic high. The number of job vacancies, however, remains broadly unchanged.”
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It also comes after Reeves increased employer national insurance contributions by £25bn and increased the national living wage from April.
Critics claimed impacted part-time employment and jobs in the hospitality, leisure and retail sectors.
How much unemployment benefits can you receive?
Someone can only apply for Jobseeker’s Allowance (JSA) by getting an interview at the local Jobcentre Plus office.
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This payment is reduced or stopped if the individual in question does not keep to the agreement to look for work and cannot offer a good reason.
Up to the age of 24, the JSA weekly amount can be £72.90.
For those aged 25 or over, it can be £92.05 per week.
It’s also only available for 182 days.
Universal Credit is gradually replacing income-based Jobseeker’s Allowance, Income Support, income-related Employment and Support Allowance.
People may be eligible for Universal Credit if they have less than £16,000 in savings or other investments (not including the home you live in).
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Any assets belonging to any partners the individual in question lives with is also considered and the exact amount depends on income and circumstances.
Does this mean anything for the Budget?
This suggests the jobs market is looking rather shaky ahead of the November 26 Budget – which is nothing the government will want to hear.
It could mean the Bank of England may be more likely to cut interest rates in December, weakening its lever meant to hold back inflation.
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Meanwhile, Reeves is already trying to bridge a gap in the public finances of up to £30 billion in her Budget – which could mean hiking taxes again, thus hitting jobs and economic growth.
But, Labour is trying to address the employment crisis.
The government recently appointed former Labour health secretary Alan Milburn to lead an independent review into how mental health issues and disability affect unemployment in young people.
Meanwhile, a different review from Charlie Mayfield – former chief of John Lewis – said young adults were one of the main groups impacted by an “economic inactivity crisis” hitting the UK.
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However, unemployment could increase beyond 5% next year which made it harder for workers to bargain for higher wages, according to warnings from the Bank of England.
Work and pensions secretary Pat McFadden said “there are challenges in the labour market” but claimed the “British economy is still generating jobs”.
He said: “Over 329,000 more people have moved into work this year already, but today’s figures are exactly why we’re stepping up our plan to get Britain working.
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“We’ve introduced the most ambitious employment reforms in a generation to modernise job centres, expand youth hubs and tackle ill-health through stronger partnerships with employers.”
