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Thanks for following our coverage of the latest employment figures, showing youth unemployment at an 11-year high and vacancies dropping to a five-year low.
Stay up to date with the latest developments here.
Real household income to suffer worst drop in four years
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Real household income will have its worst year since Russia’s invasion of Ukraine in 2022 as rising price pressures squeeze family finances, economists have warned.
Real post-tax salaries per employee will fall by 1.7pc this year, before contracting a further 0.8pc in 2027, according to Oxford Economics.
Households will resort to spending their savings as they struggle to secure stronger pay rises to mitigate the impending inflation shock, according to senior economist Edward Allenby.
He said: “Labour market conditions are already relatively loose and unemployment is likely to rise further as intense cost pressures and weak consumer demand weigh on private sector hiring and support from public sector job creation wanes.
“This will limit workers’ bargaining power in wage negotiations. In addition, the ongoing freeze in most tax thresholds and allowances will mean that income tax and employee National Insurance Contributions will continue to rise strongly, limiting growth in take-home pay.”
Mr Allenby warned lower income households would be worst hit by the effects of the Iran war as higher inflation will likely be concentrated in “essential” items such as food, energy and petrol.
He said: “Inflationary pressures are now intensifying due to the surge in oil and gas prices since the start of the Middle East conflict, compounding the drags from tightening fiscal policy and already-elevated interest rates.
“As a result, we expect household finances will come under renewed strain over the next couple of years.”
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Pound falls as jobs market weakens
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The pound fell after data showed that Britain’s employers reined in their hiring and posted fewer job vacancies in April.
The Office for National Statistics said payrolls plunged by 100,000 in April, which was the biggest monthly fall since May 2020 during the first Covid lockdown.
Sterling declined by 0.2pc against the dollar to $1.341, after jumping by 0.8pc on Monday. However, it was up 0.1pc versus the euro at €1.154.
Sterling was lower versus the US currency on Tuesday as traders scaled back bets on the Bank of England raising interest rates.
Bank of England urged to cut rates to avoid ‘entrenching weakness’
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The Bank of England has been urged to cut interest rates or risk policy that “entrenches unnecessary weakness” in the British economy.
Policymakers are expected to leave borrowing costs unchanged again next month even as the ongoing Iran war risks driving up inflation.
It comes after ONS data showed British businesses shed 100,000 people from payrolls in the month of April and reduced job vacancies to a five year low.
Investment bank Jefferies said the jobs figures, which also showed a rise in unemployment to 5pc, sharpened the “tension” around whether the Bank of England should raise interest rates to combat an inflation shock caused by the Iran war.
Economist Modupe Adegbembo said: “While energy‑driven inflation risks dominate near term, the labour market backdrop is already loosening, increasing the risk that policy remains too tight and entrenches unnecessary weakness.”
She predicted the Bank would leave interest rates on hold at 3.75pc next month and urged policymakers not to delay rate cuts to support the economy.
She said: “The risk is not that higher inflation reignites wage‑price dynamics.
“Rather, with the labour market already softening and policy still restrictive, the more likely outcome is a prolonged period of weakness.
“While policymakers will need time to assess the persistence of the shock, the data strengthen the case that delaying easing risks entrenching unnecessary slack in the real economy.”
Retail and hospitality vacancies drop by 18,000
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Retail and hospitality firms saw some of the largest falls in payroll numbers and vacancies in the first quarter of the year, ONS data show.
The ONS said firms in the sectors had flagged “economic and geopolitical uncertainty” as reasons to halt hiring.
Retail and hospitality firms are seen as being particularly exposed, having already been hit with soaring labour costs in recent years.
The ONS said retail vacancies were down 7,000 quarter on quarter in the three months to April, while they were 11,000 lower for hospitality.
The number of payroll workers in the sectors was also sharply lower, with retail estimated to be down 76,000 year on year in April and hospitality seeing a 75,000 drop.
Standard Chartered blames AI as it cuts thousands of jobs
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Our financial correspondent Tom Saunders has details on the latest blow to Britain’s jobs market.
Standard Chartered is planning to cut thousands of jobs as artificial intelligence agents increasingly replace back-office staff in the finance sector.
The banking giant said overnight that the number of administrative roles at the company would be cut by at least 15pc by 2030, equivalent to nearly 8,000 jobs.
The company did not provide details on where it intends to cut the roles but it has significant back-office operations across India, China, Malaysia and Poland.
UK stocks jump as rate rises ‘unlikely’
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The FTSE 100 climbed as weaker jobs figures make an interest rate rise by the Bank of England next month “unlikely”.
The UK’s benchmark stock index was up 0.7pc in morning trading, while the mid-cap FTSE 250 had climbed 0.8pc over hopes the inflation shock from the Iran war would prove temporary.
Money markets show there is a 22pc chance of a rate rise in June and traders are betting on two increases in the Bank Rate to 4.25pc this year, down from three rises predicted last week.
Suren Thiru, chief economist at ICAEW, said the latest jobs figures “signal a growing distress within the UK’s labour market as soaring labour costs and the fallout from the Iran war drive more businesses to reduce recruitment and limit pay awards”.
He added: “Muted wage growth and falling payroll employment make a June rate hike less likely, by fuelling optimism that a softening labour market can help ensure this inflation shock proves more transitory than persistent by dampening demand across the economy.”
Stocks across Europe were also higher after Donald Trump paused a planned attack on Iran and said there was a good chance of a nuclear deal, sending oil prices lower.
The US president said on Monday he had halted a planned resumption of attacks against Iran to allow time for negotiations to take place on a deal to end the war, after Tehran sent a new peace proposal to Washington.
Brent crude, the international oil benchmark, was last down 1.5pc to $110 a barrel.
Government borrowing costs fall after weak jobs data
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The cost of government borrowing has fallen as the weak jobs figures meant traders reduced bets on rises in interest rates.
The yield on 10-year gilts, a benchmark for the interest rate the Treasury pays to borrow money, has fallen from 5.1pc to 5.06pc after payrolls plunged by 100,000 between March and April and youth unemployment surged.
James Moberly, an economist at Goldman Sachs, said: “The data slightly increase our confidence that the Bank of England will hold in June, although a hike remains possible if energy price pressures continue to escalate.
“Looking ahead, we expect the unemployment rate to rise further in the remainder of 2026 as growth slows, while rising labour market slack and the timing of pay settlements should moderate the degree of pass-through from higher headline inflation to pay growth this year.”
Young people being price out of jobs, say Tories
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Young people are being priced out of the jobs market as a result of inflation-busting hikes in the minimum wage, the shadow business secretary said.
Andrew Griffith said: “Rising youth unemployment is a damming indictment of this no-growth, no-hope government.
“Above inflation hikes in state-set wages are simply pricing them out of the market even before AI.
“No wonder so many young people are joining the exodus of Brits leaving to other countries.”
Britain expected avoid 2022-style inflation shock due to weak jobs market
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Weak pay growth and April’s sharp drop in payrolls should help reassure the Bank of England’s policymakers that the country can avoid a repeat of the 2022 cost of living crisis, when an energy shock led to rapid pay and price rises across the economy.
Thomas Pugh, economist at RSM, said there is little room for workers to demand big pay rises to compensate for higher energy bills and fuel prices this time around.
“For the Bank of England, weaker payroll numbers – even once the larger than usual upward revisions due to the start of the tax year are accounted for – combined with a sharper-than-expected slowdown in private sector regular pay growth to 3.0pc, which is now consistent with 2pc inflation, will play into the MPC’s doves’ concerns that the economy is softening and should lessen the hawks’ worries that the jump in fuel prices will feed through into broader second-round effects,” he said.
“Indeed, the weak labour market substantially lowers the risk of higher energy prices feeding through into higher wages as they did in 2022, as evidenced by slowing pay growth. Workers are in a much weaker position than they were in 2022, and will find it harder to bid up nominal wages to protect their real incomes.”
At last month’s interest rate meeting, the Monetary Policy Committee held the base rate at 3.75pc.
Labour must address cost of employment, say bosses
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Business leaders said the dire figures are the result of the expensive policies.
Alex Chen-Hall at the Institute of Directors said the Government “must urgently address the rising cost of employment if it is to reverse this decline.”
“This weakening of the jobs market is a direct result of the Government’s employment policies; by increasing the costs and risks involved with hiring via the Employment Rights Act, consecutive years of above-inflation minimum wage increases, and the employer National Insurance increase, the Government has materially damaged the business case for taking on staff,” she said.
The Youth Jobs Grant will do little to encourage bosses to take on more staff, she cautioned.
“The only sustainable way to encourage employers to create more jobs is to remove barriers to hiring,” said Ms Chen-Hall.
“This should begin with meaningful tripartite negotiations with business and unions on the implementation of the Employment Rights Act, including on trade union access to workplaces and guaranteed hours contracts.”
Weak jobs market to ‘squeeze real incomes’
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Interest rates will be kept on hold next month as the weaker jobs markets is poised to “squeeze real incomes” just as the Iran war pushes inflation higher, an economist said.
Yael Selfin, chief economist at KPMG, said: “Today’s data strengthens the case for a continued wait-and-see approach from the Bank of England and we expect the Bank to keep interest rates unchanged at its June meeting.
“Wage growth has fallen further, while underlying labour market conditions are loosening.
“Although the Bank will continue to monitor wage dynamics closely, concerns around persistent wage pressures are likely to be tempered by the weak state of the labour market.
“Wage growth eased to 3.4pc in March, with both private and public sector pay growth slowing. Workers are likely to face a period of declining real pay, as headline inflation is set to outpace earnings, driven by higher energy and food prices.
“Unlike the 2022 energy shock, the weaker labour market is expected to limit workers’ ability to secure higher pay settlements to offset rising costs. Businesses are also likely to be more cautious in raising prices than they were in 2022, when demand was stronger and firms were hit simultaneously by rising input costs and stronger pay pressures. That said, the rise in labour costs following the Budget last year has served to squeeze margins for many.
“Headline unemployment increased to 5pc in the three months to March. Forward-looking indicators point to marked softening in hiring intentions, suggesting that this improvement is unlikely to be sustained. Vacancies also edged lower in April, suggesting that the conflict in Iran is beginning to weigh on hiring. As a result, we expect unemployment to rise gradually over the coming months.”
Foreign workers rise as British-born staff fall
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The number of foreign-born workers employed in Britain climbed by 578,000 in the past year, according to the ONS’s surveys.
Over the same period the number of British-born workers fell by 180,000.
It continues a long pattern since Covid began. Since the end of 2019 – just before the pandemic struck – the number of foreign-born workers has risen by almost 1.9m, to a total of 7.7m.
In stark contrast, employment among those born in Britain has dropped by more than 600,000 to below 26.7m.
Traditionally, those born overseas have been employed at a lower rate than those born in the UK.
That pattern switched in 2022. Now the employment rate among foreign-born residents of working age stands at 77.2pc. That is a record high, and firmly in excess of the 74.4pc employment rate among those born in Britain.
Interest rate rises risk triggering ‘recessionary dynamics’
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The weakening of Britain’s jobs market will make the Bank of England more wary of raising interest rates this year, economists have said.
Andrew Wishart, senior UK economist at Berenberg, said the data proved markets were predicting too many rate hikes this year.
Payrolls dropped by 100,000 between March and April while in private sector pay growth dropped to a six-year low of 3pc, the ONS said.
Mr Wishart said the drop in payrolls “will make the Bank of England wary of pushing the labour market over a tipping point that triggers recessionary dynamics”.
He added: “The market still prices three hikes today, but the labour market is too weak to bear them.
“Even if energy prices remain high, we suspect that the BoE will deliver one quarter point hike at most. In our base case in which the Strait of Hormuz reopens soon, we think it would remain on hold before resuming cuts at the end of the year.”
Private sector pay growth hits six-year low
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Private sector wages in the first quarter were up by 3pc compared to the same period a year ago.
That is the weakest growth since October 2020, during the Covid pandemic.
By contrast regular pay in the public sector increased by 4.8pc, the smallest rise since December 2024.
Wages dropped in the construction industry for the first time since lockdown, with a decline of 0.6pc on the year.
Earnings in finance grew by less than average, up 2.6pc on the year.
The largest raises - outside the public sector - came in wholesale and retail, and in services, each up 3.6pc.
Annual inflation stood at 3.1pc in the first quarter, indicating that the typical private sector worker was worse off than a year ago, while those in the public sector saw their living standards improve.
FTSE 100 rises as traders cut bets on rate rises
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The FTSE 100 rose at the open as traders reduced bets on higher interest rates following the weak jobs figures.
The UK’s flagship stock index climbed 0.3pc to 10,352.23 while the domestically focused FTSE 250 rose by 0.4pc to 22,688.49.
Payrolls under Labour down 277,000 from record highs
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The number of people in payrolled employment plunged by 100,000 between March and April, according to preliminary tax data.
That represents the sharpest fall since May 2020, in the depths of the first Covid lockdown.
It also continues a long run of almost unbroken decline which began in October 2024 – the month of Rachel Reeves’s first Budget.
Since then payrolled employment has fallen by more than 277,000, from a record high of almost 30.5m to less than 30.2m.
Steep declines were recorded across a range of industries in April.
The number working in wholesale, retail and motor garages tumbled by more than 25,000 to 4.2m, the lowest number seen on tax records dating back to 2014.
Headcount dropped by 18,100 in hospitality, another industry badly affected by tax raids and the higher minimum wage.
Significant falls were also seen in sectors including professional, scientific and technical work - down 17,150 - construction, down 16,360, and manufacturing, which saw a drop of almost 10,000.
Jobs market will get worse, economists warn
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Britain’s jobs market downturn will get worse in the coming months as businesses grapple with the Labour leadership turmoil and higher costs from the Iran war, Deutsche Bank has said.
Chief UK economist Sanjay Raja warned: “Geopolitical uncertainty will now be amplified by domestic political uncertainty.
“Questions around the economic outlook will grow – including tax speculation.
“And we expect firms to limit any hiring over the coming months as cost pressures mount. Equally, we expect firms to keep wage rises to a minimum as corporates navigate both uncertainty and rising cost pressures over the coming quarters.”
However, he said the downturn in Britain’s jobs market will stop the Bank of England from raising interest rates at their next meeting.
He said wage growth is falling faster than expected, which will slow down the rate of inflation.
Money markets indicate there is just a 22pc chance that the Bank of England’s Monetary Policy Committee (MPC) will raise rates next month, down from 43pc a week ago.
Mr Raja said: “Falling wage pressures will drag on domestic inflation, meaning that the MPC could be tempted to look past the unfolding energy shock.
“Indeed, today’s print shows that wage momentum is now consistent with the Bank’s 2pc target – even if headline inflation is not.”
— Office for National Statistics (ONS) (@ONS) May 19, 2026Regular wage growth in the three months to March 2026 was 3.4% excluding bonuses, down from 3.6% the previous period.
Including bonuses the rate was 4.1%, up from 3.9% in the previous period.
Read the release ➡ https://t.co/x7OSJRL70F pic.twitter.com/oxgmb8CSCN
Cabinet minister blames Iran war as unemployment rises
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The Work and Pensions Secretary has blamed the war in Iran after unemployment rose to 5pc.
Responding to the rise in worklessness, as well as an 11-year high in youth unemployment, Pat McFadden said: “Today’s figures show there were 416,000 more people in work than there was this time last year.
“While this is encouraging, we know the conflict in the Middle East is casting a shadow on the labour market.
“However, thanks to the choices we have made, we are in a stronger position to deal with the continuing volatility and costs of the war in Iran with our economy ranking as the fastest growing of any European G7 country last year.
“Boosting opportunity and tackling youth unemployment in every area remains our priority, and through our Jobs Guarantee we are helping young people into work, while engaging employers to ensure they have the skilled workforce that they need.”
Retail and hospitality cut vacancies and staff
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Britain’s hospitality and retail sectors have suffered some of the largest drops in vacancies and people on payrolls over the last year, the ONS said.
The sectors have been some of the hardest hit by Labour’s decision to impose inflation-busting increases in the minimum wage and higher employer National Insurance contributions.
ONS director of economic statistics Liz McKeown said: “Latest figures suggest the labour 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.
“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 the last year.
“Early estimates of the number of people on payroll in April point to further weakness.
“However, at the start of the new tax year, these figures carry greater uncertainty and have often seen larger than average upward revisions.”
Unemployment rises to 5pc
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The unemployment rate has climbed to 5pc after the biggest drop in payrolls since the first Covid lockdown.
Britain’s unemployment rate rose from 4.9pc in the three months to February, the Office for National Statistics said.
Payrolls shrank by 100,000 between March and April to 30.2 million., which was the largest drop since the height of the first Covid lockdown in May 2020.
Good morning
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Thanks for joining me. Youth unemployment has surged to an 11-year high as Labour’s tax raids hit the jobs market. Here is what you need to know.
5 things to start your day
1) One in nine young Britons on benefits | Worklessness crisis among the under-25s is ‘approaching recession scale’, report finds
2) Iran weaponised world trade and others are following suit | Fears grow as nations openly discuss imitating Tehran’s hold over the Strait of Hormuz
3) Burnham’s plans won’t survive contact with the Treasury | Manchester Mayor’s push for public ownership relies on taxes and borrowing
4) Burnham backs away from borrowing plans after IMF warning | Mayor of Manchester pledges not to exempt defence spending or alter Reeves’s fiscal rules
5) Why Streeting is wrong to claim Brexit was a ‘catastrophic mistake’ | The former health secretary’s statements are contradicted by Britain’s economic growth since the referendum
What happened overnight
Markets steadied overnight after Donald Trump said he had postponed planned strikes on Iran, raising hopes that a fresh diplomatic push could avert a wider Middle East conflict and further disruption to global oil supplies.
Oil prices fell back from earlier highs after the US president said Gulf allies, including Saudi Arabia and Qatar, had asked Washington to “hold off” military action while negotiations continued. The retreat in crude prices helped Wall Street pare losses and pushed Treasury yields lower.
Tokyo’s Nikkei 225 index was down 1.75pc at 58,475.90, dragged lower by technology stocks as investors worried about rising oil prices and higher global bond yields. South Korea’s Kospi was also weaker after recent record highs, with chipmakers under pressure ahead of key Nvidia earnings.
Hong Kong’s Hang Seng slipped 0.89pc to 26,160.33 while the Shanghai Composite edged down 0.1pc to 4,051.43.
Australia’s S&P/ASX 200 edged down 0.09pc to 8,946.90. India’s Sensex, meanwhile, rose 0.65pc to 78,493.54.
Taiwan’s Taiex was down 0.68pc at 40,891.82, while India’s Sensex climbed 0.65pc to 78,493.54.
Oil prices remained elevated after more than two months of war between Iran and Israel, though crude pared earlier gains after Donald Trump said he had postponed planned US strikes on Iran to allow more time for negotiations. Brent crude, the international benchmark, settled up $2.84 at $112.10 a barrel, having traded around $70 before the conflict erupted in late February.
The American benchmark S&P 500 slipped 0.07pc to 5,963.18 while the tech-heavy Nasdaq Composite fell 0.51pc as investors pulled back from semiconductor stocks ahead of Nvidia results later this week. The Dow Jones Industrial Average rose 0.32pc.