Britain’s unemployment rate rose to 4% at the end of May, official figures showed Tuesday, as the economy struggles to curb soaring inflation.
The unemployment rate rose from 3.8% in the three months to April, according to figures released Tuesday by the British Statistics Office.
This is the first time that the unemployment rate has reached 4% since the beginning of 2022, which surprised analysts who had expected it to stabilize at 3.8%.
Despite the rise, UK Finance Minister Jeremy Hunt said, “The labor market is strong, with unemployment at historic lows”.
The rate has fluctuated between 3.7 and 3.9% in recent months, reaching historically low levels.
The British Statistics Office stated that this rise is mainly due to the increase in the number of unemployed people for more than a year.
The number of job vacancies continued to decline for the 12th consecutive month between April and June.
“Due to rising inflation, the real value of weekly earnings is still declining, although it is now at its slowest rate since the end of 2021,” said Darren Morgan, director of economic statistics at the Office for National Statistics.
In a major speech late Monday, Hunt stressed that “there can be no sustainable growth without eliminating inflation, which discourages investment and undermines consumer confidence”.
Britain’s annual inflation rate has fallen in recent months but remains close to 9%.
This is well above the Bank of England’s 2% target, which has led to several rate hikes by the central bank.
Inflation in the UK is much higher than policymakers had hoped, and price pressures will struggle to abate anytime soon as long as earnings continue to rise at the current pace.
The Office for National Statistics revealed that average regular wages, excluding bonuses, were 7.3% higher in the three months ending in May than in the same period a year earlier.
And while Bank of England Governor Andrew Bailey and Hunt called for wage restrictions, thousands of people working in the public and private sectors continue to strike in an attempt to raise wages to keep pace with inflation.
Raising interest rates hurts mortgage holders and exacerbates the cost of living crisis in the country.
The Bank of England has tightened the key lending rate 13 times in a row, to 5%, in a bid to curb soaring inflation.
Bailey said Monday it was very important that the BoE fulfill its mandate to bring inflation back to its target and provide an environment of price stability in which the British economy can thrive.
But commercial lenders at this time raised interest rates on home loans significantly.
The average two-year mortgage peaked in 15 years at 6.66% Tuesday, according to data provider Moneyfacts.
This level was last recorded during the global financial crisis of 2008 and exceeded the highest level recorded last October at 6.65%.
Rising mortgage rates prompted the government to provide emergency support, including flexibility in payments and a minimum period of 12 months before lenders can seize their homes.
Amid the fallout, lawmakers on Tuesday sought testimony from the heads of UK mortgage lenders.
Henry Jordan, commercial director for homes at the Nationwide Building Society, told the cross-party Treasury Committee that clients faced monthly payments that cost them a third as high.
Andrew Assam, director of homes at Lloyds Banking Group, said that despite the turmoil, “arrears remain very low in a historical setting and are still lower than what we saw before Covid”.
Analysts believe that the situation may worsen in the coming months as the Bank of England raises borrowing costs, which in turn leads to higher mortgage rates further.