Rachel Reeves conceded the Government had “more to do” but defended her stewardship of the economy as figures showed the UK’s unemployment rate stuck at a four-year high.
The Chancellor insisted Labour had been “creating more jobs” since entering office despite vacancies declining over the last quarter, with experts warning of a further “cooling in the labour market”.
Speaking to reporters on a visit to Belfast on Tuesday, Ms Reeves said the Government had returned stability to the economy but that there was “absolutely” more progress to be made.
“There is more to do, but in the first year, we’ve managed to return stability to the economy, we’re growing the economy and reducing costs, particularly mortgage costs for hard-pressed families,” she said.
The Office for National Statistics (ONS) earlier released figures showing the rate of UK unemployment struck 4.7% in the three months to June.
It was the same as the previous three-month period, which had been the highest level since June 2021.
Meanwhile, average earnings growth, excluding bonuses, remained at 5% for the period to June.
UK vacancies tumbled by 44,000 over the three months to July to 718,000 – the lowest number of job openings since April 2021.
Ms Reeves acknowledged there had been a decline in the quarter but said there was “really positive news” in the figures, with some 384,000 more jobs in the economy than there were just over a year ago.
“The most important figure today is that there are 384,000 more people in work than when I became Chancellor,” she said.
“Everybody who can work should be in work, and as a Government, we’re committed to helping more people back to work. There are huge opportunities in our economy.”
The signs of further pressure in the labour market alongside recent weak economic growth pose a challenge for the Government and policymakers at the Bank of England.
Last week, the Bank of England indicated that unemployment was likely to rise further later this year as it chose to cut interest rates again to 4%.
The latest labour market statistics from the ONS were in line with predictions from economists.
The data showed that the number of payrolled employees fell by 66,000 for the quarter to June, with an estimated 26,000 drop between May and June.
It came as figures also revealed that recent weakness in the UK hiring market continued further, with vacancies dropping to a four-year low.
Vacancy numbers fell 5.8% over the quarter to July, with a particularly sharp drop in the arts, entertainment and recreation sectors.
Meanwhile, wage growth remained at 5% for the three months to June, but was only 1.5% once inflation is taken into account, thanks to an uptick in the cost of living in recent months.
ONS director of economic statistics Liz McKeown said: “Taken together, these latest figures point to a continued cooling of the labour market.
“The number of employees on payroll has now fallen in 10 of the last 12 months, with these falls concentrated in hospitality and retail.
“Job vacancies, likewise, have continued to fall, also driven by fewer opportunities in these industries.”
James Smith, economist at ING, said: “The UK jobs market is undoubtedly cooling, though a more modest fall in payroll employment suggests that the worst may be behind us, following big tax and living wage hikes.
“Better news on wage growth suggests the Bank can still afford to cut rates in November, though after last week’s hawkish meeting, this call has become less clear-cut.”
The figures come amid warnings from economists that the Chancellor will have to hike taxes in the autumn budget to plug a black hole of up to £51 billion in the public finances.
The National Institute of Economic and Social Research (Niesr) earlier this month said weaker-than-expected recent economic activity, U-turns on welfare cuts and forecast-beating borrowing mean Ms Reeves is on track to miss one of her fiscal rules by £41.2 billion in 2029-30.
Including the need to rebuild the fiscal buffer of just under £10 billion that has been wiped out, she will have to find more than £51 billion, according to the leading think tank.
Ms Reeves has refused to rule out tax rises at the budget since Labour MPs forced ministers to make concessions on welfare reforms, which the Government had hoped would save up to £5 billion a year.
