EuroWire, LONDON: The UK unemployment rate unexpectedly fell to 4.9% in the three months to February, the lowest level since summer 2025, as the latest labor market release showed a decline from 5.2% in the previous rolling quarter. The Office for National Statistics said the employment rate edged down to 75.0%, while the economic inactivity rate rose to 21.0%, leaving a mixed picture beneath the headline fall in joblessness and showing that fewer people were counted as either working or actively seeking work.
Pay growth also slowed in the latest reporting period. Regular earnings excluding bonuses rose 3.6% from a year earlier in December to February, while total earnings including bonuses increased 3.8%. In real terms, adjusted for inflation using CPIH, regular pay growth was 0.2% and total pay growth was 0.4%. The regular pay figure was the weakest since late 2020, extending a year-long easing in wage pressure that had been a central feature of the UK’s labor market data over recent months.
Other measures continued to point to softer hiring conditions. Early estimates showed the number of vacancies fell by 29,000 from the prior quarter to 711,000 in January to March, the lowest level since February to April 2021. Payrolled employment was estimated at 30.3 million in March, down 11,000 from February and 65,000 from a year earlier. The claimant count for March stood at an estimated 1.694 million, up on the month but lower than the level recorded a year earlier.
UK vacancies and payrolls remain under pressure
The latest figures indicated that the drop in unemployment did not coincide with broader gains across the labor market. Employment slipped at the same time inactivity increased, and the Office for National Statistics continued to advise caution over Labour Force Survey based measures while recommending they be read alongside vacancies, payrolls and claimant data. That left the broader labor picture weaker than the unemployment rate alone suggested, with several indicators still pointing to reduced hiring activity and softer demand for workers.
Sector data showed wage growth remained uneven across the economy. Regular earnings in the public sector rose 5.2% on the year in December to February, compared with 3.2% in the private sector. Total pay growth was 5.2% in the public sector and 3.5% in the private sector. Among industries, wholesaling, retailing, hotels and restaurants recorded one of the strongest regular pay increases at 4.2%, while construction posted one of the weakest readings at 0.5% during the same period.
Bank rate backdrop sharpens focus on labor data
The release came with the Bank of England holding Bank Rate at 3.75% and its next scheduled policy decision due on April 30. The central bank’s website lists current inflation at 3.0%, above its 2% target. The labor figures therefore arrived against a backdrop of slower wage growth, a lower unemployment rate, falling vacancies and a job market in which payroll employment has continued to edge down, adding fresh detail to the latest snapshot of domestic economic conditions.
Taken together, the data showed a UK labor market with lower joblessness but weaker hiring and pay momentum. Britain entered the spring with fewer vacancies, slower earnings growth and a modest decline in payroll employment, even as the headline unemployment rate moved lower. With employment easing and inactivity rising, the figures showed that the improvement in unemployment was accompanied by weaker underlying measures of workforce participation and labor demand across the economy.