Dr Sangwoo Lee comments on latest UK labour market figures

Dr Sangwoo Lee, Assistant Professor at the Institute for Employment Research, University of Warwick, said: “The March 2026 release confirms a labour market in structural transition. Unemployment has risen to 5.2%, its highest since late 2020, even as economic inactivity continued declining to 20.7%. Rather than signalling genuine recovery, this pattern suggests a return to work that an increasingly slack labour market is struggling to absorb, with rising unemployment reflecting insufficient demand to accommodate those re-entering the workforce.

“The defining structural feature remains the divergence between shrinking payrolls, down 109,000 annually, though the early February 2026 estimate suggests contraction may be easing and rising household survey employment. This reflects workers increasingly absorbed into non-traditional arrangements offering weaker job security and income protection rather than stable employment growth.

“Demand-side weakness is reinforced by the unemployed-to-vacancy ratio rising to 2.6 from 2.5, nearly double its level two years ago, intensifying competition for available positions and prolonging unemployment spells. Long-term unemployment now comprises 25.3% of all unemployment, up from 23.7% last quarter.

“Looking ahead, decelerating nominal wage growth from 4.6% to 3.9% would ordinarily support further interest rate reductions. However, the Bank of England is expected to hold rates at 3.75% today, mainly due to the renewed inflationary pressures from the Middle East conflict. Even were rates to fall, cheaper borrowing is unlikely to reverse the structural shift away from stable payrolled employment or reintegrate the growing share of long-term unemployed whose detachment reflects barriers monetary policy cannot address. Strengthening protections for workers outside traditional employment remains the most urgent policy priority.”