Unemployment has risen to its highest level in almost four years, and the jobs market continues to show signs of weakening.
In the quarter to April 2025, wage growth across the economy remained strong, but is weaker compared to recent months. Unemployment and employment levels both rose (unemployment notably so), and economic inactivity fell, but still sits above 9 million. Therefore, the labour market picture is fundamentally the same despite some new stories emerging, and the challenge of supporting the recruitment and retention of talent remains a top policy priority.
The UK employment rate (for people aged 16 to 64 years) was estimated at 75.1% in the period between February 2025 and April 2025, which is modestly up on the quarter and the year. The UK unemployment rate (for people aged 16 and over) was estimated at 4.6% across the same period, also up on the year and the quarter, and the highest level recorded in almost four years.
The UK economic inactivity rate for people aged 16 to 64 years old was 21.3% in the quarter to April 2025, marginally down on the year and the quarter, which is consistent with the trend observed in recent months. The provisional estimate for the number of vacancies in the UK economy in the three months to May 2025 is 736,000, representing a decrease on the quarter (-63,000) and the year (-150,000). This represents the 35th consecutive quarterly decline.
Estimates for payrolled employees in the UK decreased by 55,000 (-0.2%) between March and April 2025 and fell by 115,000 (-0.4%) between April 2024 and April 2025. The early estimate of payrolled employees for May 2025 decreased by 109,000 (-0.4%) on the month and decreased by 274,000 (0.9%) on the year to 30.2 million. Early estimates are subject to significant revisions as HMRC receives more data. The earlier timing of the data extract for May 2025 means these estimates are more uncertain than usual and require added caution when interpreting.
Annual growth in employees' average regular earnings (excluding bonuses) in Great Britain was 5.2% in the three months to April 2025, and annual growth in total earnings (including bonuses) was 5.3%. Annual growth in real terms (adjusted for inflation using the Consumer Prices Index including owner occupiers' housing costs (CPIH)), for regular pay and total pay stood at 1.4% and 1.5%, respectively, across the same period.
This month's data highlights a similar story to the one noted in previous months, but with some new trends developing. Wage growth remains strong but has weakened, and the rising cost of business, from the NICs rise to the increase in the National Minimum Wage, is feeding through into greater dips in wage growth. Another notable drop in vacancies, coupled with an increase in unemployment and the number of economically inactive individuals who are available and open to work, also indicates that more employers are choosing to scale-back recruitment plans as a way to absorb rising business costs.
Employers will be looking ahead to this week's Spending Review for government to take proactive steps to help address the spiralling cost of employment and increase businesses' financial headroom so that they can invest in workforce development and productivity-led growth. In the skills and workforce space, businesses will particularly be looking for greater clarity on plans for Growth and Skills Levy reform. For example, how much should firms expect to be able to spend on quality, non-apprenticeship training and, critically, when will they be able to do so? Moreover, employers across the economy remain keen to work with government to address the challenges presented by the Employment Rights Bill, including huge administrative costs associated with guaranteed hours contracts for all qualifying low-hours workers (including those who have no interest in accepting or receiving it).
