The Rise in Unemployment and the Risk of a “Broken Ladder” Emerging

It was recently reported that the UK unemployment rate rose to 5.2% going into 2026. This is the highest rate in 5 years. On its own, this number isn’t that worrying, but when looking at this through the lens of young people, there is a risk of a broken ladder emerging.

This rise in unemployment has been gradual. Over recent quarters, job vacancies have fallen, wage growth has slowed and the number of people competing for each role has increased. It signifies that:

• Businesses are becoming more cautious about hiring
• Economic growth is slowing
• Cost pressures reshaping workforce decisions
• Structural mismatches between skills and roles are widening

The most impacted by this is young people, who find entry-level positions more competitive than ever. Alongside this is the looming worry of AI agents who can work for far cheaper and a lot more effectively. It risks breaking the ladder, where young people can’t begin to climb in their career.

Youth Unemployment – The Broken Ladder

One of the most concerning elements of the recent data was the impact that unemployment was having on younger workers.

Unemployment for 18-24 year olds was 14% leading up to the start of 2026. This is the highest rate in 11 years (not accounting for the pandemic).

Indeed, this statistic is arguably more worrying than the general unemployment rate. The job market has never been harder for young people, especially in graduate roles, where there are often thousands of people applying for one job.

It damages social mobility for young people. If you work hard through school/college/university, and you can’t find work, it is extremely demoralising. Additionally, it impacts the future generations, who will begin to think that these career endeavours aren’t worth it, as they see how difficult it is to find work afterwards.
During uncertain economic times, like we are beginning to see in the UK, organisations often freeze graduate schemes, reduce apprenticeship intakes or pause junior hiring. Freezing these hiring efforts is understandable in the short term, but over time, they can hollow out future leadership options.
Keeping the youth engaged in employment is essential for supporting the UK economy in the coming years.

Changes to Budgets Impacting Hiring

Recent increases in employer costs, like higher minimum wage and increases in National Insurance Contributions (NIC), may be negatively influencing hiring decisions. When the cost of employment rises, businesses become more selective.

Certain sectors feel cost increases more acutely, and entry-level roles (more youth unemployment) are the first to be scrutinised.

“Higher labour costs, reflecting last year’s increase in employer NICs and rises in the adult minimum wage appear to be weighing most heavily on entry-level hiring. At the same time, firms are likely reassessing junior roles in the face of rapid advances in AI.” – Martin Beck, Chief Economist, WPI Strategy

Digital Transformations – The Rise of AI

We’ve seen a massive digital transformation in the last few years, with AI tools getting better and better. Whilst it may not yet be happening much, it won’t be long before employers look towards AI agents as taking over complete junior positions.

AI agents are systems that can autonomously execute multi-step tasks, make decisions (within parameters) and even communicate with customers.

AI agents are an emerging technology, however, Microsoft’s AI Chief Executive, Mustafa Suleyman said that within the next 12-18 months, artificial intelligence could replace most white-collar work.
Unlike traditional automation, AI agents don’t just follow scripts. They can:

• Draft reports
• Analyse datasets
• Respond to customer queries
• Conduct research
• Generate marketing copy
• Write code
• Summarise meetings
• Process invoices
• Coordinate schedules

Historically, these tasks were handled by:

• Graduate analysts
• Junior marketers
• Research assistants
• Customer support executives
• Paralegals
• Operations associates

In other words, entry-level professionals. For businesses, it makes sense. An AI agent can work 24/7, doesn’t need a salary and can often work faster than human workers. However, it may be ‘good’ in terms of productivity, but impacts every other aspect of the business.

Workplace culture, for one, would diminish with AI agents. For many people, work is where they do a large part of their socialisation. Automation threatens this, reducing the amount of people in offices greatly.

Another massive impact is, whilst they might automate less experienced roles, the senior positions will still be filled by humans. This becomes an issue in the long term, as it is those junior staff that become senior, through time and experience.

This is where the ladder fails. Companies need to be regenerative, replace retired/leaving seniors with new entry-level seniors or high-level juniors.

The Human Side of the Numbers

It’s easy to think of unemployment as a statistic, but every 0.1% increase represents thousands of individuals who are out of work, facing uncertainty.
People can internalise unemployment stretches, believing there is something wrong with them. They aren’t experienced enough, they don’t come across well in interviews, etc. but often, it is just the sheer number of people applying for jobs that leads to application rejections.
For individuals, this moment can act as a reminder to invest in adaptability. Continuous learning can make you stand out in a crowd. Broadening your skillsets, networking with other professionals and improving your digital fluency can greatly improve your employability.

Looking Ahead

Whilst unemployment is on the rise, we believe the more important issue is the unemployment numbers in young people and how this will impact the future generations, both economically and socially.
Businesses need to strengthen their talent pipelines, understanding that they are investing in the next generation. Sure, an AI agent might be able to automate parts of these junior roles, but employers need to look ahead at the career ladder of the next generation.

With bold claims like those from Microsoft stating that white-collar jobs will be fully automated within a year and a half, alongside the current rise in unemployment, it appears to be only getting worse for people looking for work. Businesses need to invest in humans, embracing their tenacity, realness and opportunity for growth into leadership positions.