Unemployment at 5.1% as Labour policies face scrutiny amid wage and business concerns

Unemployment rose to 5.1 percent in the three months through October, the highest level since the Covid-era rebound in 2021, according to labour-market statistics released this week. Payroll numbers fell by 38,000 in November, underscoring a labour market that remains fragile as long-term sickness keeps millions out of work. The rate of economic inactivity—the share of working-age people not in the labor force, whether because of sickness, caregiving responsibilities, early retirement or simple demotivation—stood at about 21 percent. About 2.8 million people were not employed due to long-term sickness, figures that reflect persistent weakness in the core jobs market.

Analysts say the data come as Labour faces internal tensions over its economic program. In a column, Ruth Sunderland argued that Labour has little idea of who working people are—and even less of how to look after their interests. With Rachel Reeves advocating a tough fiscal and wage agenda, critics warn that higher employers' National Insurance contributions and increases to the minimum wage could deter hiring. Angela Rayner’s workers’ rights bill has just passed the House of Lords, intensifying the policy conversation about how to balance protections for workers with business competitiveness.

Beyond politics, wage growth has cooled, which may help to cap inflation and reinforce expectations of a possible quarter-point rate cut by the Bank of England. In the public sector, pay growth is running about 7.6 percent year over year, well ahead of private-sector gains and helping to sustain the welfare state even as earnings in the private sector lag.

Seasonal opportunities in retail and hospitality—traditionally a bright spot this time of year—have been dampened as business-rate reform has raised costs for many small operators, including village pubs facing new levies for the first time. The shift compounds pressures on sectors that historically absorb a lot of young workers and early-career staff during holidays.

Youth unemployment remains a persistent challenge, with around one million young people not in education, employment or training. Many would ordinarily find work in hospitality or retail, sectors that are now contending with higher costs and tighter margins. Analysts caution that the combination of inflation moderating and cost pressures could prolong the stretch between job openings and job seekers for younger cohorts.

Analysts warn that advances in artificial intelligence could reshape the job landscape further, potentially narrowing opportunities for graduates as more tasks become automated and the market absorbs them at a different pace than schools and universities have prepared them for.

Pathos Communications, a new City public-relations firm founded by Omar Hamdi, listed on AIM this week, marketing itself as a disruptor of the traditional retainer-based model with pay-for-performance tied to secured media coverage. The start-up’s approach highlights ongoing experimentation in how firms price services and compete for attention in a crowded media environment, particularly for smaller clients outside the traditional power centers of London and New York.

Investors are also watching a potential shift in geopolitical risk that could affect markets. A credible peace deal between Ukraine and Russia could provide a boost to shares in infrastructure, housing, transport and energy sectors as investors seek cyclical opportunities beyond technology. Reconstruction costs are already estimated at about $524 billion and rising, creating a long-running pipeline of opportunity for construction and materials firms. The Irish cement group CRH has acquired cement plants in Ukraine, with others quietly surveying the terrain. Yet observers caution that the terms of any settlement and its durability will largely determine whether revival in construction markets translates into sustained stock gains, and defense stocks could remain volatile amid ongoing security concerns.

DIY investing platforms remain in focus for individual investors seeking low-friction access to markets. Providers listed in market roundups include AJ Bell, Hargreaves Lansdown, interactive investor, Freetrade and Trading 212, among others. These platforms reflect a broad appetite for diversified, low-cost exposure to global equities as buyers weigh short-term volatility against longer-term growth potential.

Taken together, the latest labour-market data and policy debates illuminate an economy under strain even as inflation cools. They also underscore a political economy in flux, with Labour facing scrutiny over its approach to jobs, wages and welfare while markets weigh how new business models and geopolitical risks will shape the path ahead.