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UK Labour Market Shows Signs of Cooling Amid Ongoing Cost Pressures and Skills Shortages

UK Labour Market Shows Signs of Cooling Amid Ongoing Cost Pressures and Skills Shortages

The UK labour market remains relatively tight, with employment still high by historical standards, although clear signs of cooling are beginning to emerge. Vacancies continue to fall, hiring activity has slowed, and while pay growth is easing in nominal terms, real wages have started to recover modestly as inflation declines. Despite these shifts, labour providers and employers across several sectors continue to face persistent cost pressures and skills shortages.

Labour Market Overview – Key Findings

The latest ONS Labour Market Overview highlights the following trends:

  • The UK unemployment rate rose to 5.1%, equating to 1.832 million people unemployed.
  • Youth unemployment remains elevated, particularly among the youngest age groups (36.6% for ages 16–17 and 13.4% for ages 18–24).
  • The employment rate decreased slightly to 74.9%, with 34.226 million people in employment.
  • The UK economic inactivity rate remained broadly unchanged at 21.0%, though 234,000 fewer people are economically inactive compared with 12 months ago.
  • 9.099 million people are economically inactive – lower than last year but 469,000 higher than pre-pandemic levels.
  • Vacancies stood at 729,000, broadly unchanged on the quarter but 77,000 lower than a year ago. There were 2.5 unemployed people per vacancy between August and October 2025, an increase on both the previous quarter and year.
  • Payrolled employees fell by 38,000 in November 2025 to 30.3 million, and by 171,000 over the year, although levels remain 1.24 million higher than pre-pandemic.
  • Annual growth in regular pay (excluding bonuses) was 4.6%, and 4.7% including bonuses. After adjusting for inflation, real pay growth was 0.5% for regular pay and 0.6% for total pay.
  • The claimant count rose on the month to 1.683 million, although it declined over the year.
  • Redundancies increased to 5.3 per thousand employees, higher than both the previous quarter and 12 months ago.
  • 39,000 working days were lost due to labour disputes in October 2025, broadly in line with the previous period.

For further information or commentary on the latest labour market developments, please contact David Essam at davidessam@frontlinerecruitment.co.uk

Source ALP/ONS

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