Unemployment rate set to rise despite jobs gap closing, report warns

Updated: 

The UK's unemployment rate is expected to increase next year amid a slight deterioration of labour market conditions, an influential economic group has predicted.

The Organisation for Economic Co-operation and Development (OECD) said the UK's labour market indicators had compared well with other countries.

At the end of last year, the UK unemployment rate was 4.8% compared with an OECD average of 6.2%, while the employment rate was 4% higher at 65.5%.

But in its latest employment outlook, the Paris-based organisation said: "The projections for 2017-18 anticipate that UK growth will ease as rising inflation weighs on real incomes and consumption, and business investment weakens amidst uncertainty about the United Kingdom's future trading relations with its partners.

"A slight deterioration of labour market conditions is expected to bring its unemployment rate closer to the OECD average of 5.7% by the end of 2018."

The jobs market generally continues to improve in countries covered by the OECD, with the employment rate finally returning to pre-crisis levels, said the report.

It added that workers on low and middle incomes have seen their wages stagnate, while the share of "middle skilled" jobs has fallen, contributing to rising inequality and concerns that top earners are getting a disproportionate share of the gains from economic growth, said the report.

OECD Secretary-General Angel Gurria, launching the report in Berlin, said: "While the jobs gap is closing, many people do not feel the benefits as they are facing stagnant wages and no career prospects.

"We need an inclusive labour market that reconnects the benefits of our economic model with those who work in it."

The report was published ahead of the latest UK unemployment figures on Wednesday amid signs that the jobs market remains buoyant.

Adzuna said more than 300,000 new jobs had been posted on its site since last week's General Election.

Co-founder Doug Monro said: "The number of UK vacancies currently sits at its highest level since 2015 and the employment statistics have been a beacon of hope among other gloomy economic indicators.

"Sectors such as tech are helping underpin the buoyant jobs market."