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Jun 18, 2026 Major1
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UK unemployment falls to 4.9% as wage growth exceeds forecasts
UK unemployment fell to 4.9% in April, below expectations, while wage growth exceeded forecasts at 4.4%. The data puts pressure on the Bank of England to consider rate hikes, though the labour market shows underlying weakness with falling vacancies and rising irregular work.
Quick Facts
Who
Office for National Statistics (ONS)
What
Unemployment fell to 4.9%
When
three months to April 2026
Where
United Kingdom
- Unemployment fell to 4.9%
- Wage growth excluding bonuses rose to 4.4%
- Vacancies fell to lowest level since April 2021
- Payroll employment rose by 2,000 in May
- Bank of England expected to hold rates at 3.75%
The UK unemployment rate dropped to 4.9% in the three months to April, down from 5% in the previous quarter, according to official data from the Office for National Statistics (ONS). The figure surprised economists, who had expected the rate to remain unchanged. Average wage growth excluding bonuses rose to 4.4%, beating forecasts of 4%, while total wages including bonuses held steady at 3.4%.
The stronger-than-expected labour market data has increased pressure on the Bank of England’s Monetary Policy Committee (MPC) to consider raising interest rates. The Bank’s governor, Andrew Bailey, has previously flagged public sector pay as a concern; annual regular earnings growth in the public sector stood at 5.1%, compared to 2.9% in the private sector. The MPC is widely expected to hold the base rate at 3.75% when it meets later this week.
Analysts noted that the stall in the downward trend of private sector wage growth could fuel consumer spending and hinder progress toward the MPC’s 2% inflation target. The ONS reported that the consumer prices index remained at 2.8% in May. James Smith, an economist at ING, highlighted that private sector pay growth has fallen significantly from 5.2% a year ago to below 3%, suggesting further easing ahead.
Despite the headline improvements, the labour market shows signs of underlying weakness. Vacancies fell by 19,000 to 707,000 in the three months to May, the lowest level since April 2021. PAYE payroll employment rose by only 2,000 in May, following a sharp 53,000 drop in April. Economists warned that employers are increasingly turning to irregular work arrangements such as zero-hours contracts, and that youth unemployment is rising.
Ashley Webb, an economist at Capital Economics, described the labour market as “very weak and likely to weaken further,” but said the data “increases the chances of one or two insurance hikes later this year.” Louise Murphy of the Resolution Foundation added that “the UK labour market is weaker than it has been in recent years,” noting that real wages for private sector workers have been falling since October.
Work and Pensions Secretary Pat McFadden acknowledged the ongoing instability in the Middle East, linked to the Iran conflict, as a source of uncertainty for the UK labour market. However, a potential peace deal between the US and Iran has contributed to a recent fall in oil prices, which could ease cost pressures on businesses in the coming months.
Why This Matters
The unexpected drop in UK unemployment and faster wage growth raise the likelihood of Bank of England rate hikes, which could increase borrowing costs for consumers and businesses. However, underlying weaknesses—falling vacancies and rising irregular work—suggest the labour market is not as strong as headline figures imply. For investors, this mixed data means greater uncertainty on the timing of monetary policy tightening; for UK households, it may signal higher mortgage rates but also potential wage gains in some sectors.
Timeline & Sources
Apr 30, 2026
WireThree-month period to April ends; unemployment rate falls to 4.9%
May 31, 2026
WirePAYE payroll employment rises by 2,000; vacancies fall to 707,000
Jun 18, 2026
WireONS publishes labour market and wage data
Jun 18, 2026
WireBank of England MPC expected to hold base rate at 3.75%