UK unemployment hits five-year high as job market weakens

Office for National Statistics figures show the number jobless people remained at 5.2% in the three months to January, with vacancies dropping by 6,000 to 721,000 in the three months to February.

These levels have not been seen since the three months to January 2021.

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Young people are bearing the brunt of this shrinking job market, with 14.5% of 18 to 24-year-olds without work - the highest level since early 2015.

Wage growth was at its lowest in more than five years, meaning pay was still rising faster inflation, but more slowly in both the private and public sectors.

Average pay, including bonuses, rose 3.8%, while average weekly earnings, which include bonuses, increased by 3.9%.

Just a month earlier, those measures of pay increases had both been 4.2%.

It comes as the Bank of England is expected to announce a freeze on interest rates later today.

Economists had previously been expecting policymakers to deliver a cut on the current 3.75% rate, but the Iran war and soaring oil prices have raised the threat of surging inflation, kicking a rate reduction into the long grass.

Falling wage growth in the UK will not be enough to ease these fears, but may well keep a rate hike off the cards, according to Thomas Pugh, chief economist at RSM.

He said: "The unemployment rate holding at 5.2% in January highlights just how weak the labour market was coming into the Iran crisis, and higher energy prices will only worsen that picture.

"That weakness will temper the likely hawkish shift from the Monetary Policy Committee this afternoon and is the key reason why we expect a prolonged hold if energy prices stay high, rather than rate rises."