The UK's unemployment rate rose to 4.4% in the three months to April 2024, up from 3.8% in the same period a year earlier, according to the Office for National Statistics (ONS). This represented approximately 1.5 million people out of work, a significant increase from the previous year. Economic growth remained sluggish, with quarterly GDP growth ticking up by just 0.1% in early 2024, leaving the economy vulnerable to stagnation.
High borrowing costs, with interest rates remaining at 5.25%, have severely impacted investment in construction and manufacturing. These sectors saw output declines of 2.1% and 1.4% respectively over the quarter. High rates have also pressured households, with mortgage interest payments eating into disposable incomes.
Retail and hospitality sectors also faced significant headwinds as households scaled back on non-essential spending. Spending on leisure, hotels, and restaurants dropped by 4.5% compared to the previous year. In response to financial uncertainty, many households have increased precautionary savings, with the household saving ratio rising to 10.2% in early 2024 from 7.6% in mid-2023.
In contrast to these declines, some high-tech service sectors, such as information technology and professional services, continued to expand and recruit capital-intensive labor. Exports of financial and business services to non-EU nations grew by 3.2% over the same period, providing some support to the wider economy.
Evaluate the effect the increase in unemployment in the three months to April 2024 from the same period the year before, is likely to have had on the UK economy.
