Data for the Office for National Statistics has revealed a mixed picture on the UK’s jobs market, with warnings that an economic shock from the Middle East conflict may have made matters worse
The rate of UK unemployment fell to 4.9% in the three months to February, down from 5.2% in the three months to January, the Office for National Statistics said.
Average wages grew by 3.6% over the same period, down from 3.8% in January and the lowest since November 2020, the ONS said. Pay included bonuses rose by 3.8%. Both figures were better than expected.
The figures cover the period before the full impact of the economic shock caused by the Middle East war. Experts have warned that the conflict is likely to drive up inflation and could cause an increase in unemployment as firms hit by increased costs scale back on hiring. Wage growth in the public sector averaged 5.2%, and 3.2% for the private sector.
Meanwhile, the estimated number of job vacancies decreased in the latest quarter, following broadly flat estimates since March to May 2025. Early estimates for January to March suggest a decrease of 29,000 (3.9%), to 711,000, compared with October to December – the lowest level of vacancies since February to April 2021.
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ONS Director of Economic Statistics Liz McKeown said: “The number of workers on payroll remained broadly flat in recent periods, reflecting ongoing weak hiring.
“Vacancies fell to their lowest level in almost five years, but with unemployment also falling the number of vacancies per unemployed person remains broadly unchanged.
“Alongside falling unemployment, the number of people not actively seeking work increased, with data suggesting fewer students seeking work alongside their studies. Regular wage growth has slowed further with growth at its lowest rate in over five years.”
Yael Selfin, chief economist at KPMG UK, said “Today’s data confirmed wage growth was easing ahead of the Middle East conflict. The risk of higher energy costs reigniting pay pressures is also lower at the moment. In contrast to the energy shock of 2022, the labour market is in a weaker state, constraining the bargaining power of workers, lowering the likelihood of a potential wage-price spiral. However, this is likely to remain a key issue for the Bank of England, which is now expected to keep interest rates on hold this year.
“Unemployment fell slightly to 4.9% in the three months to February, consistent with survey evidence suggesting hiring activity was recovering before the conflict in the Middle-East. However unemployment is likely to trend higher in the coming months as firms scale back on hiring in response to rising costs and weaker demand
“Pay growth fell to 3.6% in the three months to February, down from 3.8% in January. The recent slowdown in pay growth has been primarily driven by a fall in public sector pay settlements, which eased to 5.2% in the three months to February. Slower economic activity is likely to see pay growth ease further over the coming months and rising household costs could also squeeze workers’ real pay as the impact of higher prices filters through.”
Luke Bartholomew, deputy chief economist, at financial giant Aberdeen said: “While the sharp drop in unemployment reported today is certainly eye catching, it will probably be largely dismissed by the market. That’s partly because it only covers a period up to the end of February, so before the Iran conflict, and also because it largely seems to reflect rising inactivity rather than stronger hiring.
“Indeed, the timelier payrolls data, which covers March and so should capture some of the early impact of the war, remains weak, falling once again.
“Meanwhile, with cash wages continuing to moderate and inflation set to increase sharply in the coming months, it is likely households are about to experience another period of negative real wage growth, which will weigh further on growth.”
The figures come ahead of all-important inflation data due to be published by the ONS on Wednesday which will reveal any early impact of the Middle East conflict in March.
