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UK unemployment rises at fastest rate in five years

Unemployment in Britain has unexpectedly risen for the first time in two years, according to new figures.

Research from the Office for National Statistics (ONS) found that the rate of unemployment rose from 4.3% to 4.4% between October and December.

As reported by the BBC, there were a total of 1.47 million unemployed Brits (those not in work but seeking and available to work); an increase of 46,000 from July to September last year.

Matt Hughes, a senior statistician from the ONS, said: “This is the sharpest increase in the unemployment level ONS has seen in almost five years.”

Despite the rise in unemployment rates, wages are still on the rise. Wages grew by an average of 2.5%, up from 2.4% the previous month, although the increase remained below inflation.

Britain’s inflation rate is currently running at 3% which means that workers are still being hit with a real wage squeeze – but at least the gap is beginning to narrow.

Interestingly, the ONS report shows that UK companies are actually struggling to find workers, despite the fact that unemployment has risen. The number of vacancies hit a record high in the last quarter, up 24,000 to 823,000.

The rising unemployment rate could also cause the Bank of England to rethink their plans to increase interest rates from May.

Speaking to The Guardian, Professor Costas Milas of the University of Liverpool explained that the unemployment rates rising is a surprise and that the Monetary Policy Committee (MPC) were expecting a decrease which would have played into their decision to put up interest rates.

Professor Milas said: “It was this forecast that fuelled expectations of higher, than previously thought, interest rates on the grounds that the economy would be able to afford an increase in the policy rate without a damaging impact on unemployment.

“Today’s unemployment rate is potentially a turning point on the thinking of MPC members. It is more likely than not that they will want to see a reversal of this rise in unemployment in the next few months before contemplating another interest rate hike in May 2018.”

The Bank of England, however, does expect real wage growth to move into positive territory during 2018.

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