Youth unemployment has surged to its highest stage in additional than a decade, elevating fears of a “misplaced technology” and intensifying expectations that the Financial institution of England will minimize rates of interest subsequent month.
Figures from the Workplace for Nationwide Statistics present that within the three months to December 2025, the unemployment charge amongst 16 to 24-year-olds climbed to 16.1 per cent. That equates to just about 740,000 younger individuals out of labor, a rise of round 120,000 in beneath a 12 months.
Within the first quarter of 2024, earlier than the implementation of upper employer nationwide insurance coverage contributions and minimal wage rises, the youth unemployment charge stood at 14.2 per cent, or roughly 620,000 individuals.
The rise means younger individuals account for practically half of the overall improve in unemployment throughout the economic system over the identical interval, regardless of representing simply 13 per cent of the working-age inhabitants.
Economists warn that whereas spikes in youth joblessness had been seen through the 2008 monetary disaster and the Covid-19 pandemic, the present rise is uncommon as a result of it has occurred and not using a comparable surge in unemployment amongst older age teams.
Peter Dixon, senior economist on the Nationwide Institute of Financial and Social Analysis, mentioned youthful employees had been being “priced out of the market”. Louise Murphy of the Decision Basis famous that just about one in six younger individuals who need to work can not discover a job.
Some analysts argue that latest fiscal coverage modifications have disproportionately affected entry-level employment. Will increase in employer nationwide insurance coverage contributions and the compression of minimal wage differentials between age bands have raised labour prices for sectors similar to hospitality, retail and leisure, industries that historically present first jobs for varsity leavers and college students.
Additional strain is predicted in April when further provisions of the federal government’s Employment Rights Act, together with expanded sick pay entitlements, come into drive.
Regardless of the deteriorating employment figures, there’s a optimistic aspect inside the information: financial inactivity amongst younger individuals has returned near pre-pandemic ranges, suggesting extra are in search of work. Nevertheless, many are struggling to safe positions.
The softening labour market has strengthened expectations that policymakers will transfer to help progress. Monetary markets are more and more assured that the Financial institution of England will minimize its base charge from 3.75 per cent to three.5 per cent when its financial coverage committee meets on 19 March.
Analysts at Financial institution of America mentioned the rise in unemployment and easing wage progress “retains us comfy with our base case of a March minimize”, whereas ING economist James Smith described the newest jobs report as retaining the central financial institution “firmly on monitor” for a discount.
In its most up-to-date forecasts, the Financial institution of England acknowledged that downturns in employment usually emerge first amongst youthful cohorts, warning that present traits could sign broader weak spot in labour demand.
With inflation easing and progress subdued, consideration now turns as to whether charge cuts will help stop the latest spike in youth unemployment from turning into entrenched.
