Wednesday briefing: Why young people are bearing the brunt of the unemployment crisis

Good morning. I’m Karen McVeigh and I’ll be bringing you First Edition alongside Martin Belam and Aamna Mohdin for the next few weeks. If there is anything you would like to see covered in the coming weeks, please hit reply with your suggestions. The rate of UK unemployment has climbed to the highest level since the Covid pandemic. The Office of National Statistics (ONS) said on Tuesday that unemployment rose to 5% in the three months to September, up from 4.8% in the previous quarter. Liz McKeown, director of economic statistics at the ONS, said the figures point to a “weakening labour market”, just under two weeks before Rachel Reeves is expected to deliver her second budget. The number of people on the payroll are falling, with almost 1.8 million classing themselves as unemployed. Part of the rise is being driven by youth unemployment. For today’s newsletter, I talked to Phillip Inman, the Guardian’s senior economics writer, about what’s really happening but first, today’s headlines. Five big stories BBC | MPs and BBC staff members have called for Robbie Gibb to be removed from the corporation’s board as outgoing director general Tim Davie hit out at the “weaponisation” of criticisms of the broadcaster. Politics | Downing Street has launched an extraordinary operation to protect Keir Starmer amid fears among the prime minister’s closest allies that he is vulnerable to a leadership challenge in the wake of the budget. Welfare | Millions of “Waspi women” have been given fresh hope that they might receive compensation after the UK government announced it would revisit a decision to deny them payouts. Environment | Protesters and security guards tussled at the Cop30 climate talks late on Tuesday night, when a group of Indigenous and non-Indigenous people stormed the conference centre in Belém. Social care | Private companies operating care services in just three regions of England have made more than £250m in profits in three years. In depth: ‘The pre-budget jitters are real’ The rising unemployment rates could affect the budget, interest rates and pay. Rachel Reeves will need to avoid depressing the economy and putting more people out of work as she delivers what is expected to be a tax-raising budget next month. She will need to address joblessness, following on from last autumn’s budget which was heavily criticised by businesses hit by the rise on national insurance they warned would raise the cost of employing. *** Are the unemployment figures really that bad? “Yes they are as bad as they seem, particularly for young people,” says Phillip Inman. Hiring has stalled in part due to pre-budget speculation over tax rises, while earlier this month, the Bank of England warned that investment, consumer spending and the housing market had all stalled in the run up to Reeves’s speech on 26 November. “The pre-budget jitters are real,” Phillip says. “People have got a sense that the budget is getting bigger and bigger in its scope and what it might do, who it might tax and the extent to which it might tax them.” He adds that “a growing level of uncertainty” over recent months, “which means people stop investing, stop hiring, stop expanding. You are living with a stasis, a stagnant economy, just waiting for the government to make its next move.” *** Why are young people so badly affected? Underlying the weakening labour market are a couple of worrying trends. One, that much is being driven by youth unemployment. In October, Liz McKeown of the ONS said we were seeing different patterns among age groups, adding “the increase in unemployment was driven mostly by younger people.” The combination of a dearth of part-time work, caused by the rise in national insurance employers pay, and the rise of AI have created problems for young people, Phillip told me. “One of the really bad things Labour did at the last budget was that, not only did they raise national insurance contributions, which raised the cost of employing someone, but also lowered the salary at which they start paying it. This caught people who work part-time. Most of the time, if you employed someone part-time, they fell below the threshold.” Labour “shot themselves in the foot” here, by completely underestimating the impact of the national insurance raise on young people who enter the workforce via part-time work, Phillip says. These young people, who often start off in part-time work, often in the retail, leisure or hospitality sector “are now unemployed”, he says. And then there is AI. “We don’t know how many people are affected,” Phillip says. “It might not impact leisure or hospitality, that need a person to do the meet or greet or sell something, but in areas like book-keeping, your entry level into accounting, AI can do those jobs. If you are a department of 10 and the company is growing, you get technology to do those jobs.” On Tuesday, the work and pensions secretary, Pat McFadden, acknowledged “there are challenges in the Labour market” but insisted the “British economy is still generating jobs.” McFadden said he was “concerned by the growth” in the number of young people not in employment or training over the past five years. *** What other issues are affecting young people? Alongside the rise in youth unemployment, there are rising levels of ill health. More than a million young people are not in education, employment or training. And more than a quarter of 16- to 24-year-olds who are not in education, employment or training are inactive because of disability and illhealth, according to the Resolution Foundation. That figure has more than doubled since 2005. Much of the rise in the number of “economically inactive” adults that Labour would like to help back into work is being fuelled by young people. Between 2015 and 2024, the number of people with work-limiting conditions rose by 900,000, or 32%, for 50- to 64-year-olds. For those aged 16 to 34, the rise was 1.2 million, or 77%. Phillip says: “We have this double whammy, from tight government spending and a health issue that lingers. Not only do we have a lot of people unemployed because they couldn’t find work in the last 18 months, we also have a lot of young people off with mental health issues. His own personal view, is that the mental health crisis among the young stems from Boris Johnson’s handling of the Covid pandemic, and the unrecognised impact that period had on young people. *** What can be done to help youth unemployment? “We’ve gone from a minimum wage worth about 40% of the average wage to one that is 60% of the average wage,” Phillip says, adding that there is an argument for keeping it as it is and not raising it further. “The idea would be to say, OK we protected the low paid through the pandemic and cost of living crisis. Now its time for it to rise just in line with prices, and that could also help take the heat from Reform suggesting it shouldn’t rise.” Because high national insurance and a high minimum wage makes youth unemployment high, employers could pivot to a different model, such as the one in France, where it takes a lot to break into work, but the wages are higher, Phillip says. “We’ve been a country where we pay next to nothing when you first get a job, but if you work hard and go up the scale you do OK. That has made the UK an attractive country for young people from the continent.” “There is one argument, to say, that Britain could be like France. France has a very high cost of employing someone, which they have always had, and the price of that is high youth unemployment. It takes a lot to break into a job, with many years of training, getting more qualifications, doing jobs for free, but you get on. It’s not a trade union way of doing things, because trade unions like to have structures that protects their workers who have already acquired skills.” *** Will things get better? Many experts say that, because of the unemployment figures, the Bank of England will almost certainly cut interest rates in December. The bank will meet next month to judge the health of the economy and what the cost of borrowing should be. A cut in December, says Phillip, now looks “nailed on”. “Things will get better, most of the forecasters say. We’re expecting the Office for Budget Responsibility to say next year is going to be difficult as everyone readjusts to the expected tax rises. But then the economy will start to grow more strongly, unemployment will fall.” One reason to be hopeful, Phillip concludes, is that the Bank of England “will come to the rescue”. “Interest rates are at 4%. We’re expecting them to fall in December and carry on falling next year.” What else we’ve been reading Sammy Gecsoyler’s explainer of the perplexingly huge protein shake industry taught me that there is a shortage of whey, the once-discarded liquid byproduct of cheese-making used in most protein powders. Martin Nicole Lipman, a writer and editor at n+1, examines how France is fighting fast fashion and in particular, how its citizens and MPs have registered their opposition to the Singapore-based, ultra-fast fashion company Shein, with petitions, protests, investigations, fines and regulation. She wishes others would follow. Karen Lucy Knight looks at a new documentary that reveals how parents were routinely offered surgery for intersex children born with atypical genitalia in the 70s, often with tragic long-term results. Martin My colleague Eromo Egbejule, the Guardian’s West Africa correspondent, has written a shocking story of how a young female TikTok influencer, Mariam Cisse, has been publicly executed by suspected jihadists in Mali, underlining the erosion of state control in the West African country which is in the grip of an insurgency. Karen Podcast producer Willard Foxton has a new blog. The first post is about the perilous state of the industry for limited-series podcasts, but it opens with a quite brilliant anecdote about a gallery visit. Martin Sport Football | Sam Kerr hit a double Chelsea breezed past Austrian outfit St Pölten to seal their second Women’s Champions League victory of the campaign. Cricket | Ollie Pope is poised to stay at No 3 in the batting lineup as England focus on continuity for the looming Ashes series. Rugby | Steve Borthwick has called on his side to prepare for “pain and suffering” if they are to end their losing run against the All Blacks, demanding the most selfless England team in history in the showdown on Saturday. The front pages The Guardian leads with “No 10 on alert amid fears of challenge to leadership”. The Financial Times says “Unemployment increase deals fresh blow to Reeves before crunch Budget”, while the Times goes with “1m more on benefits with no need to seek work”. Top story at the Mail calls it “Another day in Starmer’s socialist paradise”, while the Telegraph continues to examine the fallout at the national broadcaster with “‘We are the very best of society’ – Defiant Davie blames BBC’s enemies for bias scandal”. The i paper says “Fresh hope for Waspi women as Labour promises to look again at compensation”. On the Harvey Willgoose murder, the Mirror says “I’ll meet son’s killer”. “Shake up as show returns” – that was the Sun’s take on ITV’s I’m a Celebrity… Get Me Out of Here. Today in Focus How China is trying to silence UK academics How entangled are China and the UK universities sector? A professor explains in 2024 that strange things began to happen. Amy Hawkins reports. Cartoon of the day | Ben Jennings The Upside A bit of good news to remind you that the world’s not all bad Imagine rocking up for your Sunday league over-35s match to find yourself up against Emile Heskey, Joleon Lescott, Papiss Cissé and a side with nearly 1,900 Premier League appearances between them. That could happen if you are playing against Wythenshawe FC.Former Manchester City player Stephen Ireland was the first on board. “I came down in pre-season just because I love playing football,” Ireland says. “I love the fitness side of things. I invited some of the others and slowly but surely everyone wants to play.“I didn’t want it to be something where 15 of us ex-pros came in and took over, I want a good mix with the old vets lads. It’s a nice humbling experience to interact with fans as well. It’s great to give back and the club have been so nice to me. We’re all local as well.” Sign up here for a weekly roundup of The Upside, sent to you every Sunday Bored at work? And finally, the Guardian’s puzzles are here to keep you entertained throughout the day. Until tomorrow. Quick crossword Cryptic crossword Wordiply