UK unemployment predicted to reach highest level since 2015

The UK labour market is showing no signs of significant improvement as the unemployment rate dropped marginally to 4.9% for February to April 2026. The jobs market continues to lack momentum as the economy fails to get out of first gear.

The number of vacancies dropped again by 19,000 between March and May to their lowest level since February to April 2021. Vacancies have fallen steadily over the past couple of years, and many firms are taking a cautious approach to recruitment as they deal with higher operating costs, weak consumer demand, and an uncertain economic outlook. At the same time, they are trying to figure out how AI investment will impact the labour force in the future – largely without much success.

Average earnings growth stayed at 3.4% in the three months to April which was above forecast, underpinned by public sector pay awards and the consumer and perhaps surprisingly the leisure sector.

The more troubling story behind these latest labour market statistics lies with younger workers. Youth unemployment is running at more than three times the national unemployment rate. About one in six young people in the labour force is unemployed, with the number who are not in education, employment or training (NEET) close to one million – the highest for a decade – and this number has risen markedly over the past year. For many young people, securing their first step onto the career ladder has become increasingly difficult as employers reduce entry-level recruitment and become more selective in their hiring.

Looking ahead, the labour market is expected to soften further over the remainder of the year, with total unemployment hitting around 5.5%, its highest level since 2015. In the absence of stronger, more sustainable economy-wide growth, businesses will not be tempted to embark on large-scale recruitment until they have greater confidence in the outlook.

At the same time, there is little evidence of a sharp rise in redundancies, suggesting unemployment is more likely to drift upwards gradually rather than rise abruptly.

Vacancies will remain concentrated in those sectors of the economy that are facing structural shortages, such as technology, healthcare, and education. Employment opportunities will continue to exist, but the mismatch between available jobs and required skills will remain a challenge.

Among its locations, accountancy and business advisory firm MHA has offices in Aberdeen and Edinburgh.