The UK unemployment rate ticked up to 5% in January to March 2026, according to data from the ONS, a 10 percentage-point increase from the 4.9% in February.
The results do not improve when looking at other indicators, with the number of payrolled employees sliding by 94,000 from January to March 2026.
Early estimates for April indicate the number of payrolled employees may have decreased by a further 210,000, although the ONS warned this is provisional.
Neil Birrell, chief investment officer at Premier Miton, noted the UK job market was resilient in the first quarter, given the mixture of a struggling economy, higher inflation and policy uncertainty it had to grapple with.
See also: Healthy UK economic growth in first quarter ‘part statistical illusion’
“However, with the Iran war ongoing and even more domestic political stress over the next few months, it’s hard to see that strength continuing,” Birrell said.
Danni Hewson, AJ Bell head of financial analysis, said: “The economy has been growing faster than had been expected, and the IMF has upgraded its forecast for growth for 2026, but these figures suggest early momentum has already begun to fall back.”
As Richard Carter, head of fixed interest research at Quilter Cheviot, noted the recent figures only captured the initial impacts of the conflict, and over the coming months, higher costs and weaker consumer demand may filter through.
Susannah Streeter, chief investment strategist at the Wealth Club, said stagflation worries are now “stalking the UK”.
“The jobs numbers show employers are becoming increasingly cautious about hiring amid a backdrop of sluggish growth, geopolitical uncertainty and increasing cost pressures.”
The numbers place the Bank of England in a challenging situation, experts said. Pay growth has slowed to 3.4% from 3.6%, which would usually be a sign of potential interest rate cuts, she explained.
But with inflation looking unstable as the Iran war continues to bite, financial markets are still pricing in three rate hikes by the end of the year, according to Streeter.
