Britain’s labour market continues to show signs of strain as wage growth slowed and the unemployment rate climbed to its highest level in nearly four years, according to the latest figures from the Office for National Statistics (ONS).

The data reveals that average regular earnings growth eased to 5.6% in the three months to March, down from 5.9% in the previous period and marking the lowest growth rate since November 2024.

Despite the slowdown, wages still managed to outpace inflation, recording a 2.6% increase in real terms after adjusting for the Consumer Prices Index (CPI).

Meanwhile, the unemployment rate rose to 4.5%, up from 4.4% in the three months to February. This is the highest rate since the period from June to August 2021, reinforcing concerns that the UK jobs market is faltering under the pressure of escalating employment costs.

The number of job vacancies fell by 42,000 in the quarter to April, bringing the total to 761,000—below pre-pandemic levels for the second consecutive quarter.

Early estimates also showed that the number of workers on company payrolls dropped by 33,000 in April, down to 30.3 million.

Liz McKeown, director of economic statistics at the ONS, said the data suggests “a cooling labour market,” noting that “the number of job vacancies has also fallen again, with the rate of decline increasing in the last few months.”

The cooling trend comes amid a double hit to employers’ costs, following the April hike in national insurance contributions and the latest increase in the national minimum wage—both policy changes introduced by the UK government this year.

Financial analysts say these cost pressures are likely dampening hiring appetite and contributing to job cuts across sectors.

Sarah Coles, head of personal finance at Hargreaves Lansdown, warned the outlook could worsen, saying it is “highly unlikely to be the end of the bad news. It means we can’t necessarily take job security and wage rises for granted in the coming months.”

While the slowdown in pay growth may offer some relief on the inflation front, economists believe it could pave the way for further interest rate cuts.

The Bank of England lowered rates to 4.25% last month and more cuts could follow if economic weakness persists.

Paige Tao, an economist at PwC UK, said the new figures may provide a “green light” for another rate cut when the Bank’s Monetary Policy Committee meets next month. However, Bank of England Deputy Governor Clare Lombardelli has warned that wage growth remains too high to guarantee a sustainable return to the 2% inflation target.

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