Unemployment continues to rise while wage growth slows.
This month's figures continue to present signs of a cooling labour market: vacancies are continuing to drop, unemployment levels rose, and nominal regular wage growth has plateaued back to 5% after intermittently hovering at 6% over the past year. This also suggests that the labour market is in a state of weakening and addressing labour market challenges remains a top policy imperative.
The UK employment rate (for people aged 16 to 64 years) was estimated at 75.2% in the period March to May 2025, up on the quarter and above estimates from the same time last year. The UK unemployment rate (for people aged 16 years and over) was estimated at 4.7% across the same period, which is also an increase on the quarter and the year.
The UK economic inactivity rate for people aged 16 to 64 years was estimated at 21.0% in the three months to May 2025, which is slightly down on the quarter and the year.
The provisional estimate for the total number of vacancies across the UK economy in the three months to June 2025 is 727,000. This represents a decrease on the quarter (-56,000) and the year (-143,000). The last time vacancies were lower was in the peak of the pandemic (February to April 2021), when vacancies sunk to 659,000.
Estimates for payrolled employees in the UK fell by 135,000 (-0.4%) between May 2024 and May 2025, and by 25,000 (-0.1%) between April and May 2025. The early estimate of payrolled employees for June 2025 decreased by 178,000 (-0.6%) on the year, and by 41,000 (-0.1%) on the month, to 30.3 million. The June 2025 estimate should be treated as provisional and is likely to be revised when more data is received next month.
Annual growth in employees' average regular earnings (excluding bonuses) in Great Britain was 5.0% in the quarter to May 2025, and annual growth in total earnings (including bonuses) was also 5.0%. Annual growth in real terms (adjusted for inflation using the Consumer Prices Index including owner occupiers' housing costs (CPIH)) for regular pay was 1.1% in the quarter to May 2025, and for total pay was 1.0% over the same period.
This month's data reinforces trends seen in recent months: vacancies are continuing to drop, inactivity levels still sit above 9 million, the number of payrolled employees fell again, and unemployment levels also crept up. Some new stories are also emerging, including real and nominal wages continuing to rise, but at a notably slower rate. The data suggests that rising costs are having a material impact on businesses' budgets and firms' ability to invest in their workforce. Without unlocking the productivity growth to pay for further cost rises, there is a real risk that concerning trends, such as rising unemployment, will worsen in the months ahead.
Government can act now to help ensure that the labour market becomes a competitive strength, rather than strain, in their mission to drive economic growth by pulling on different policy levers. This includes making Employee Assistance Programmes (EAPs) fully tax-free benefits and delivering a Growth and Skills Levy roadmap. This should outline how much businesses should expect to be able to spend on non-apprenticeship training, as well as confirming when this flexibility will be introduced.
