Unemployment increased in the three months to June even as pay grew at the fastest rate since records began, putting more pressure on the Bank of England to rein in inflationary pressures.
The UK jobless rate hit 4.2% during the quarter, up 0.3 percentage points from the previous three-month period, according to the Office for National Statistics (ONS).
It is the highest since the three months to October 2021, the ONS said, and brings the measure above pre-pandemic levels.
Payrolled employees spiked by 97,000 and total pay increased by 8.2% year on year, while regular pay – which excludes bonuses – grew by 7.8%, up 0.1% for the year when adjusted for inflation.
Scotland’s unemployment rate was lower than the UK average but saw a bigger rise over the period, coming in at 4%, up 0.9 percentage points.
AJ Bell investment director Russ Mould said: “This builds pressure on the Bank of England and has prompted an increase in sterling and gilt yields, as well as a big fall in UK stocks, as it suggests inflation is becoming increasingly entrenched in the economy.
“However, it is a fine balance. Other elements of the ONS data show signs the labour market could be cooling, with an increase in unemployment and a drop in the number of vacancies.
“Previous rate hikes are likely to have a lagged impact and this data covers an April to June period which is very much in the rear-view mirror now. It all adds up to a very tricky situation for the brains trust in Threadneedle Street which might only be further complicated by the CPI release tomorrow.”
Chancellor Jeremy Hunt said: “Thanks to the action we’ve taken in the jobs market, it’s great to see a record number of employees.
“Our ambitious reforms will make work pay and help even more people into work – including by expanding free childcare next year – helping to deliver on our priority to grow the economy.”
Scotland’s Wellbeing Economy Secretary Neil Gray said: “The increase in the unemployment rate for those aged 16 and over across Scotland reflects the challenges facing the economy amid the ongoing cost of living crisis, compounded by still high inflation and interest rates.
“The Scottish Government is committed to supporting more people into work – including those with a disability, health conditions and caring responsibilities – through employability and skills support as well as improved access to flexible working.”