UK Markets Hold Firm Despite Unemployment Rate’s Jump to 4.5%

Key Moments:

UK Labor Data Disappoints, London Stocks Steady

UK markets were generally trading higher on Tuesday morning as investors absorbed fresh labor market data showing rising unemployment and slowing wage growth in the UK. After an initial gain of 6.46 to 8,611.44, the FTSE 100 retreated to the 8,606.47 mark. The FTSE 250, in contrast, managed to maintain its momentum and rise 0.50% to 20,730.86. Meanwhile, the AIM All-Share also gained, climbing 0.25% to reach 731.10.

UK Labor Market Shows Signs of Strain

The Office for National Statistics reported that the UK unemployment rate rose to 4.5% in 2025’s first three months, a slight increase from 4.4% in the preceding period. Although the percentage was not worse than forecasts, it did mark the highest level in the past several years.

Employment among people aged 16 to 64 held steady at 75%, while the economic inactivity rate ticked up to 21.4%, 0.4% higher than the previous 21%. Moreover, the total number of job vacancies for the 34th consecutive quarter, dropping to 761,000 as 13 out of the UK’s 18 industry sectors saw declines.

Wage Growth Cools Further

Regular pay grew by 5.6% annually in the three months through March. When accounting for bonuses, total pay growth stood at 5.5%. The former fell short of forecasts by 0.2%, while the latter surpassed expectations of 5.2%.

Rising employment costs, including national insurance increases and adjustments to the national living wage in April, appear to be dampening hiring trends. Commenting on the matter, Capital Economics noted that the continued weakening of employment indicated that businesses decreased their workforce in response to increased business taxes and the recent minimum wage hike.