Unemployment in the UK has risen to 5.2%, the highest level in nearly five years, as wage growth continues to cool. The Office for National Statistics reported that joblessness in the three months to December reached 5.2%, up from 5.1% in the previous quarter. This matches economists’ expectations and marks the highest unemployment rate since January 2021. Economists warn that younger workers are feeling the impact most. Unemployment for 18- to 24-year-olds reached 14% in the three months to December, the highest rate in five years, or nearly 11 years if the pandemic period is excluded. Analysts say Britain is losing ground in global youth employment rankings. Martin Beck, chief economist at WPI Strategy, said higher labor costs, including last year’s increases in employer national insurance contributions and the adult minimum wage, are limiting entry-level hiring. He added that firms are reconsidering junior roles due to rapid advances in artificial intelligence. Wage growth also shows signs of slowing. In Great Britain, average wages excluding bonuses increased by 4.2% in the three months to December, down from 4.4% the month before. In the private sector, pay rose by 3.4%, the lowest increase in five years, while public sector wages rose by 7.2%. Once adjusted for inflation, annual pay excluding bonuses rose by just 0.8%, the lowest rate since August 2023. Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said the slowdown in wage growth is expected to continue. He noted that rising layoffs and higher employment costs are weakening workers’ bargaining power. Payroll numbers also fell. Company payrolls dropped by 134,000 compared with a year ago, and by 46,000 over the past quarter. Monthly payrolls declined by 11,000 in January. However, a previous estimate of a sharp fall in December was revised by the ONS from 43,000 to just 6,000. The rise in unemployment and slowing wage growth have raised speculation that the Bank of England may cut interest rates in the spring. Analysts warn that the combination of higher labor costs and slow hiring could continue to weigh on the UK economy in the months ahead. The data highlights ongoing challenges in the UK labor market, particularly for younger workers, and underscores the pressure on policymakers to balance economic growth with inflation and employment targets.