UK unemployment rises to 5% but inflation drops to 2.8%

Official figures from the Office for National Statistics (ONS) show that the unemployment rate in the three months to March 2026 has risen to 5% from 4.9%.

Combined with a drop in the number of job openings and slowing wage growth, the figures paint an uncertain picture for the labour market in the coming months.

Some analysts are suggesting that the figures are showing the effect of the Middle East war on the jobs market.

The ONS also reported that inflation fell to 2.8% for the year to April. This compares to 3.3% in the year to March.

The drop is largely attributed to lower gas and electricity bills. Analysts still expect inflation to increase over coming months due to the conflict. Some estimates suggest that inflation could reach 4% by the end of the year.

Slowing wage growth and increasing unemployment usually create the expectation that the Bank of England will cut interest rates. However, with the jury still out on how the Middle East conflict will impact inflation this seems unlikely in the short term.

The Bank of England will next meet to decide on interest rates on 18 June 2026.

See: https://www.ons.gov.uk/