00:00Unemployment in the UK has surged to a near five-year high, according to the Office of National Statistics.
00:06The national unemployment rate rose to 5.2% in the last three months of 2025.
00:13And it's young people who've been hardest hit.
00:16Over 16% of 16 to 24-year-olds don't have a job.
00:20That is the highest in over a decade.
00:23While that high number of young people out of work is skewing the overall joblessness rate,
00:27the rest of the workforce is actually on a lower unemployment rate.
00:32Let's talk now to Pushpin Singh, who is Managing Economist at the Centre for Economics and Business Research.
00:39Thank you very much for coming on the programme.
00:41So why is this rate so high at the moment?
00:46Well, I think it just reflects the reality of the situation in the face of elevated labour costs.
00:51The budget announcements in 2024 with regard to higher national insurance contributions
00:58and the recent hikes in national living wage, not only in October 2024, but also the announcement in October 2025,
01:06have led to higher labour costs.
01:08Now, you know, it's disproportionately affecting young people more,
01:14simply because the first thing the firms would do would be to kind of get rid of more entry-level
01:19jobs as well.
01:20So it doesn't really help the fact that those people who tend to be on the national living wage
01:25tend to be those young people working perhaps part-time in retail or hospitality.
01:29And overall, the impact on young people is the most adverse across all age groups.
01:35And the reality of the situation is that, you know, delayed career starts have a huge impact,
01:41a huge lasting impact on progression and earnings.
01:44So we're at this high unemployment rate, nearly the highest for five years.
01:49What could this end up meaning for the broader economy?
01:53I mean, there's a big question.
01:55That's the big question we're trying, all economists are trying to face, isn't it?
01:58I think more importantly, the big thing here is the fact that there's clear evidence
02:02that the labour market is softening in the face of higher labour costs over the last couple of years.
02:08What this could in turn mean is the fact that, you know, we're starting to see changes in the extensive
02:14margin,
02:15which basically relates to the number of people who are being employed.
02:18And effectively, why that is working is how that is working is we are expecting more productivity
02:23by those who are currently still employed by the intensive margin here.
02:27Now, AI has a role to play here in terms of improving productivity of those who are still employed.
02:32But the wider issue is the kind of productivity puzzle that the UK currently faces.
02:37You know, if productivity doesn't improve, unemployment kind of remains elevated.
02:42You know, that's lower tax revenues and the implications of public debt and in terms of GDP growth as well.
02:47So there are a lot of spillover impacts in terms of the fiscal coffers, the expenditure on benefits
02:52and wider public expenditure and overall GDP growth more broadly.
02:56So we saw this figure of 5.2% for the last quarter, up slightly on the 5.1%
03:02on the previous one.
03:04Does that look like a trend to you or is it perhaps just a blip?
03:09I don't necessarily think it's a blip.
03:11It's clear evidence that the labour market is softening.
03:13As I mentioned, you know, we were first seeing in the face of rising labour costs,
03:18you know, vacancies starting to come down massively post-October 2024 announcement of employer nits.
03:23Now, that's stabilised because firms have realised that they can't simply just cut at the margins
03:27in terms of reducing, you know, kind of hiring activity.
03:31They've got to cut within their own workforce now,
03:33which is why we're now starting to see the employment payroll employees drop
03:37and also a subsequent increase in the unemployment rate.
03:40We're expecting these conditions to last because, you know,
03:42these elevated labour costs are clearly here to stay.
03:45So we don't necessarily think it's a blip,
03:48but it's going to be something whereby we're expecting the unemployment rate
03:51to remain elevated for some time.
03:54Pushpin Singh, it was great to talk to you.
03:56Thank you so much for coming on the programme.
03:57That's Pushpin Singh from the Centre for Economics and Business Research.
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