Unemployment rate unchanged as wage growth slows

19th Mar 2026 07:51

(Sharecast News) - The unemployment rate was largely unchanged in January, official data showed on Thursday, while wage growth continued to slow.

According to the Office for National Statistics, the rate rose by 0.1 percentage point in November to January, to 5.2%, a five-year high.

The employment rate ticked up 0.2 percentage points, to 75.1%, while the economic inactivity rate was 0.3 percentage points lower at 20.7%.

Growth in average earnings including bonuses, meanwhile, slowed to 3.9% over the same period, from 4.2%, in line with expectations. Stripping out bonuses, wages rose by 3.8%, the lowest rate in more than five years.

Driving the growth in pay was the public sector, which saw average regular earnings growth of 5.9%. The private sector saw a 3.3% rise.

Liz McKeown, director of economic statistics at the ONS, said: "Labour market conditions were little changed at the start of the year.

"Unemployment remains at the rate reported last month...while the number of vacancies remains largely stable, with declines among smaller firms being offset by rises among larger ones."

The Bank of England meets later on Thursday to decide interest rates. A cut had been widely forecast, on the back of easing inflation and stagnant economic growth. However, following the outbreak of war in the Middle East, most now expect the cost of borrowing to be left on hold at 3.75%, with some analysts predicting rates could even rise this year.

Matt Swannell, chief economic advisor to the EY Item Club, said: "The uncertainty around the severity and duration of the recent rise in energy prices will likely pressure the Monetary Policy Committee to hold Bank Rate today. [It] will want to make sure that a surge in energy prices will not threaten the progress that's been made on disinflation before cutting rates further.

"But some signs that the deterioration in the job market's prospects have eased will make it a slightly more comfortable rate for most of the committee. While the bar for raising Bank Rate remains very high in our view, a prolonged conflict in the Middle East could see rates remain on hold until next year."

James Smith, developed markets economist, UK, at ING, said: "Vacancy rates are well below pre-Covid levels in most sectors, and the scope for those industries to absorb higher energy costs, or raise prices in response, is more limited than it was four years ago.

"If energy costs do remain elevated for a prolonged period, as ING's base case now assumes, then it is likely we'll see further upwards pressure on unemployment this year. It's hard to see wage growth picking up in that environment.

"We will think the next move is more likely to be a rate cut, even if the timing is increasingly uncertain."