The United Kingdom is facing a deepening unemployment crisis with official figures revealing the highest jobless rate since the pandemic, with young people disproportionately affected by the worsening labour market conditions.
Alarming Statistics Point to Weakening Economy
According to the Office for National Statistics, unemployment rose to 5% in the three months to September, up from 4.8% in the previous quarter. This represents nearly 1.8 million people classing themselves as unemployed, with Liz McKeown, director of economic statistics at the ONS, describing the figures as pointing to a "weakening labour market".
The timing is particularly sensitive for Chancellor Rachel Reeves, who faces delivering her second budget in less than two weeks against this troubling economic backdrop. The rising unemployment figures could significantly impact budget decisions, interest rates, and wage policies.
Youth Bear Disproportionate Burden of Job Losses
Perhaps most concerning is the concentration of job losses among younger workers. The ONS has confirmed that the increase in unemployment was driven mostly by younger people, creating what experts describe as a "double whammy" for the UK's economic future.
Phillip Inman, the Guardian's senior economics writer, explains that the situation is particularly dire for young people. "Yes they are as bad as they seem, particularly for young people," he states, pointing to a combination of factors including pre-budget uncertainty, rising national insurance costs for employers, and the emerging impact of artificial intelligence on entry-level positions.
The problem extends beyond traditional unemployment figures. More than a million young people are not in education, employment or training, with over a quarter of 16- to 24-year-olds in this category inactive due to disability and ill health according to the Resolution Foundation.
Multiple Factors Driving Youth Job Crisis
Several interconnected issues are contributing to the youth employment crisis. The rise in national insurance contributions introduced in the last budget has particularly affected part-time work, which traditionally serves as an entry point for young workers into the retail, leisure, and hospitality sectors.
Inman suggests that Labour "shot themselves in the foot" by underestimating the impact of national insurance increases on young people. The lowering of the salary threshold at which contributions begin has caught many part-time workers who previously fell below this limit.
Compounding the problem is the rise of AI, which is beginning to affect traditional entry-level positions in fields like book-keeping and accounting. "If you are a department of 10 and the company is growing, you get technology to do those jobs," Inman notes, highlighting how technological change is reducing opportunities for young workers.
Health issues, particularly mental health problems among young people, represent another significant barrier. Between 2015 and 2024, the number of people with work-limiting conditions rose by 1.2 million (77%) for those aged 16 to 34, compared to 900,000 (32%) for 50- to 64-year-olds.
Potential Solutions and Economic Outlook
Addressing the crisis requires careful policy consideration. Some experts suggest moderating future increases to the minimum wage, which has risen from about 40% of the average wage to 60% in recent years. The argument is that maintaining current levels rather than further increases could help reduce pressure on employers.
Inman also raises the possibility of the UK adopting a different employment model, similar to France's approach where higher employment costs are balanced against better wages for those who secure positions, though this comes with the trade-off of higher structural youth unemployment.
Despite the grim current picture, there are reasons for optimism. Many economists expect the Bank of England to cut interest rates in December, with further reductions anticipated throughout next year. The Office for Budget Responsibility is expected to forecast economic growth returning after a difficult adjustment period following expected tax rises.
"Things will get better, most of the forecasters say," Inman concludes, suggesting that the Bank of England "will come to the rescue" with interest rate cuts that could stimulate economic activity and job creation.
As the government prepares its budget response to the crisis, all eyes will be on measures specifically designed to address youth unemployment while balancing the need for economic stability and growth.
