LONDON, May 22 (Xinhua) -- Britain's labor market is caught in a deterioration loop of subdued confidence and cautious investment, with domestic policies leading to mounting costs of employment, geopolitical conflicts triggering instability of world economy and political unrest further increasing uncertainties.
The country's unemployment rate for people aged 16 years and over rose 0.5 percentage points year on year to 5 percent in the first quarter (Q1) of 2026, data from the Office for National Statistics (ONS) showed. The figure was also up from the 4.9-percent unemployment rate recorded in the three months to February 2026.
In the January-March period, the number of payrolled employees fell by 94,000 or 0.3 percent over the year and by 20,000 or 0.1 percent over the quarter.
Shrinking job opportunities further weakened the momentum of the labor market. ONS data showed that from February to April, job vacancies decreased by 3.9 percent compared with the three months to January 2026 to 705,000, hitting the lowest level of vacancies since February to April 2021.
The "Latest figures suggest the labor market remains soft, with vacancies at their lowest level in five years and unemployment higher than a year ago. The number of payroll employees continued to fall in the three months to March, while regular wage growth slowed further," ONS Director of Economic Statistics Liz McKeown commented.
LOWER-PAYING SECTORS, YOUNG PEOPLE HIT HARDEST
Lower-paying sectors such as hospitality and retail have seen some of the largest falls in vacancies and payroll numbers, both in recent months and over last year, McKeown said, noting that early estimates of the number of people on payroll in April point to further weakness.
The latest figures from the British Beer and Pub Association showed 161 pubs closed across Britain in Q1, an equivalent of almost two a day. The closures led to more than 2,400 job losses, half of which are younger people's jobs.
David Bailey, professor of business economics at the University of Birmingham, said higher National Insurance contributions and a faster rise in the minimum wage curbed employment, especially for sectors that rely heavily on younger and lower-paid workers.
Even if large firms may manage the influence, for smaller employer, these policies can lead to freezing hiring, cutting hours, or simply not replacing staff who leave, he added.
In Q1, there were around 729,000 young people aged 16 to 24 who were unemployed, 110,000 more than the previous year. The unemployment rate for young people was 16.2 percent, up from 14.2 percent from the year before.
"Youth unemployment jumping sharply is particularly worrying because younger workers are usually the canary in the coal mine for the wider economy," Bailey noted.
Stressing that growing numbers of young people are struggling to get a job, Paul Nowak, general secretary of the Trades Union Congress, said the government's Jobs Guarantee is an important step forward, but young people shouldn't have to wait for 18 months before getting access to it. He urged the government to drive forward change in life chances of the youth.
HEADWINDS BOTH AT HOME AND ABROAD
While business are clearly nervous about costs and the broader economic outlook, and the conflict in the Middle East is adding another layer of uncertainty through higher energy prices and supply chain disruption, which squeezes household incomes and raises costs for employers at the same time, Bailey noted.
Geopolitical instability abroad can quickly lead to weaker confidence and hiring at home as businesses delay investment amidst uncertainty when the global outlook deteriorates. If sustained high oil and shipping costs feeds through into inflationary pressure, it will also ultimately leave workers worse off in real earnings terms, he added.
David Spencer, labor professor at the University of Leeds, said the ONS figure did not take into account fully the impact of the conflict, and expected the labor market probably to get worse in the future. He also addressed the domestic political uncertainty in the UK in terms of the challenge to the leadership of the prime minister and the rising long-term interest rates of the bond market.
Noting that there has been a lot of focus over the last couple of years on inflation, Spencer argued the priority of the government should now be switched to unemployment, which has a scarring effect on people's life.
Patrick Milnes, head of Policy for People and Work at the British Chambers of Commerce (BCC), said the unemployment rate is expected to rise this year as business uncertainty grows amid UK's political unrest and the conflict in the Middle East.
BCC's latest forecast expects it to increase to 5.5 percent, he said, arguing that the possibility of stagflation is very real with the conflict likely to drive higher inflation later in the year, while unemployment rising and growth remaining weak.
Releasing corporate and household cash reserves to work in the economy is the only way to get moving, said Neil Carberry, chief executive of the Recruitment and Employment Confederation, adding it requires a shot of confidence that isn't there right now due to the Middle East conflict, domestic political uncertainty and the huge rises in the cost of employment firms have faced. ■
