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Unemployment rate rises with more claiming benefits in the West Midlands

Britain's unemployment rate has unexpectedly risen to its highest rate since the summer of 2021 as the jobs market weakens further, although wage growth remains resilient, according to official figures.

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Wolverhampton's Molineux House Jobcentre in Temple Street

The Office for National Statistics said the rate of UK unemployment lifted to 4.4 per cent in the three months to April, up from 4.3 per cent in the three months to March.

The latest increase defied expectations for the jobless rate to remain unchanged and sees it reach the highest level since July to September 2021.

For the West Midlands the rate was 5.1 per cent with the employment rate at 73.9 per cent compared to 74.3 per cent nationally.

Vacancies also dropped sharply once again, down 12,000 to 904,000 in the three months to May, marking the 23rd fall in a row.

But the figures showed regular earnings growth remained unchanged at six per cent in the three months to April and continued to outstrip price rises – up 2.9 per cent when taking Consumer Prices Index inflation into account, which is the highest since the three months to August 2021.

The ONS said: "This month's figures continue to show signs that the labour market may be cooling, with the number of vacancies still falling and unemployment rising, though earnings growth remains relatively strong."

The number of people claiming unemployment benefits last month, including Universal Credit, was 1,629,190 – 3.9 per cent of the working population.

For the West Midlands the rate was 5.1 per cent with 187,475 claiming. It was up 2,585 on April.

In the Black Country Sandwell saw a rise of 260 to 13,695 – a rate of 6.3 per cent. Walsall rose 180 to 9,780 (5.6 per cent) with Wolverhampton up 130 to 12,145 (7.4 per cent and Dudley increasing by 90 claimants to 9,0005 (4.6 per cent).

Wyre Forest, including Kidderminster, had a rise of 25 to 1,830 (3.1 per cent).

Staffordshire bucked the trend with a drop of 325 to 15,480 (2.9 per cent) with Cannock Chase down by 65 to 2.050 (3.3 per cent), Stafford dropping 30 to 2,100 (2.5 per cent), South Staffordshire having 25 fewer claimants at 1,685 (2.6 per cent) and Lichfield falling 20 to 1,450 (2.3 per cent).

Jane Gratton, deputy director of public policy at the British Chambers of Commerce, said: "There are further signs that the labour market is cooling as vacancies continue to fall and unemployment ticks up. However, this has yet to translate into any noticeable weakening of growth in real wages.

"This would suggest that competition for skills is still strong, and the substantial cost pressures of wages and interest rates will continue for longer. The rise in the number of economically inactive is also a cause for concern.

"The BCC's election manifesto is clear that better skills planning is needed across the UK to boost productivity and growth. We must improve the training of staff, unlock the talent of people who have stopped looking for work and find ways to support the long-term sick back into employment.

"Getting the strong economic growth we all want to see will only be possible when the skills and workplace challenges are resolved."

The Recruitment and Employment Confederation's chief executive Neil Carberry, said: “Employers played it cool in the face of economic and political uncertainty this spring. Business surveys suggest this is starting to change, but overall vacancies remained ahead of pre-pandemic levels even during the early months of the year. Businesses tell us they are confident about hiring – but they are watching inflation, interest rates and the General Election for signals on when to go. There has certainly been a marked improvement in mood in the hiring market since Easter.

“The bigger picture is that unemployment and employment numbers remain robust and pay growth is higher than we got used to over the past decade. But the pay data is noisy right now, with a large National Minimum Wage increase and employers 2024 pay settlements still feeding into the numbers.

“The number of people who are economically inactive remains a major challenge. In July, a newly elected government will need to act quickly on labour supply or risk a £39 billion cost to the economy per year because of labour and skills shortages – just short of two whole Elizabeth Lines. All parties should use their manifestos to set out a workforce plan that can help businesses shape our workforce for the future. This should involve lowering barriers on skills, support infrastructure such as childcare and transport, regulation, immigration and tax.”

The next set of inflation figures will come just before the Bank's June 20 rates decision.

Jake Finney, economist at PwC UK, said: "The latest ONS data presents a headache for the Bank of England.

"A broad set of indicators suggests that the labour market is cooling but pay growth has not fallen to the extent they would like to see."

But he added that there remains "considerable uncertainty" over the ONS unemployment figures, as the statistics body continues to overhaul its labour force survey due to low response rates, with the full revamped version not due to be introduced until September.

More timely data from HM Revenue & Customs provided further evidence of a cooling jobs market, with the number of UK workers on payrolls falling 3,000 to 30.3 million in May, though this is subject to revision.

The latest ONS figures also showed another increase in the inactivity rate, with 22.3 per cent of those aged between 16 and 64 not actively looking for work.

There were an estimated 17,000 working days lost to strike action across the UK in April, the ONS added.