Unemployment set to hit 5.3% this year amid worrying' rise in young jobless

"The Office for Budget Responsibility said unemployment will peak at 5.3% this year, up from its previous forecast in November of 4.9%. The figure would be the highest unemployment level since the final quarter of 2020, when the UK was in lockdown during the Covid pandemic. Excluding the Covid period, it will be the highest rate since September 2015."

"Miles said the rise in unemployment was being caused by firms cutting back on hiring rather than laying off staff. This has a bigger impact on people entering the workforce, he explained. You would expect it to have a disproportionate impact on people joining the labour force and trying to find a job for the first time, and that does seem to be happening."

"All the market developments over the last week or so have been in the direction of making the economic and fiscal outcomes more difficult, said Prof David Miles, a member of the OBR's budget responsibility committee. He said there would be a material impact on inflation if energy prices keep going up and stay there."

The Office for Budget Responsibility projects UK unemployment will reach 5.3% in 2026, exceeding previous estimates of 4.9% and marking the highest rate since the Covid lockdown period. Young people face particular hardship as unemployment rises due to firms cutting hiring rather than conducting layoffs, which disproportionately impacts those entering the workforce for the first time. Simultaneously, the OBR downgraded economic growth forecasts to 1.1% for 2026 and expects inflation to decline from 3.4% to 2% by 2027. Geopolitical uncertainties, particularly the Iran conflict, create significant economic forecasting challenges and could substantially impact energy prices and inflation trajectories.

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