Rachel Reeves dealt massive blow as 'jobs tax' sparks unemployment chaos

has been dealt a massive blow as figures show increased to 4.5% in the three months to March. The Office for National Statistics (ONS) said on Tuesday (May 13) that the unemployment rate increased from 4.4% in the three months to February.

Helen Whately MP, Shadow Work and Pensions Secretary, said: "This is just the latest in a string of bleak economic figures for the Government - and they do not come as a surprise. Back in October, the OBR warned that Labour's Jobs Tax would cost 50,000 jobs, yet they pushed ahead with it anyway.

"It is clear that Labour's Jobs Tax and business rates hike are putting an intolerable burden on employers, and with Employment Rights Bill set to choke businesses in red tape, things are only going to get worse.

"It's working people who are paying the price for Labour's war on business. are being lost, wages are stagnating and opportunities are drying up. Only businesses create jobs in the economy and Labour must listen to employers before it is too late."

Jack Kennedy, senior economist at the global job website Indeed, said the labour market slowed further in April as it was hit by the "double whammy" of a spike in tariffs-related uncertainty and a policy-driven hike in employment costs.

He said: "Though the trade situation has calmed somewhat, with the easing concerns in the most exposed sectors like cars and steel, general business confidence has taken a bruising lately.

"The concern remains that lingering uncertainty will drag on hiring, with questions over the shape of the Government's Employment Rights Bill presenting a further headwind to an already fragile recruiting landscape."

The Bill will introduce a raft of measures. These include guaranteeing new rights for workers from day one of employment, such as protection from unfair dismissal, parental leave, and the right to request flexible working.

Some businesses have warned the Bill will have a chilling effect on hiring, with concerns the new legislation risks sparking expensive tribunals and an increase in the cost of admin.

Sarah Coles, head of personal finance at broker Hargreaves Lansdown, said the ONS figures also show unemployment rose over the quarter and the year, with vacancies having fallen for a 34th month in a row.

She added: "The number of vacancies looks particularly miserable when compared to the growing number of people looking for work.

"Some of this will be the impact of the hike in employers' taxes in April, as workplaces decided against hiring additional staff in an effort to keep wage bills under control."

Ms Coles warned: "This is highly unlikely to be the end of the bad news. The expects unemployment to rise from around 4.6% now to 5% in two years' time, before falling back a little."

The ONS said the latest official figures also showed further signs of a "cooling" labour market, with average regular earnings growth falling to 5.6% in the three months to March - the lowest level since the three months to November 2024.

Wages still outstripped inflation, rising 2.6% after taking Consumer Prices Index inflation into account.

The figures also showed vacancies falling and remaining below pre-pandemic levels for the second quarter in a row, while estimates showed the number of workers on UK payrolls dropped by 33,000 in April to 30.3 million.

Liz McKeown, ONS director of economic statistics, said wage growth slowed slightly in the latest period but remained relatively strong, with public and private sectors now showing little difference.

She added: "The broader picture continues to be of the labour market cooling, with the number of employees on payroll falling in the first quarter of the year. The number of job vacancies has also fallen again, with the rate of decline increasing in the last few months."

Minister for Unemployment Alison McGovern said: "Real wages are growing with around 200,000 more people into work since the publication of our Get Britain Working plan. But we know that the Government's plan for change needs more workers - in every part of our country.

"That's why we will continue to change Jobcentres, invest in British industry and get help to those who need it until everyone who can work has got a decent job and a good income."