In the quarter to January 2026, employment and unemployment levels both rose, the inactivity rate fell, vacancies were broadly unchanged, and regular wage growth slowed to its lowest level in five years. Youth unemployment also remained high. Therefore, this month’s findings have reinforced messages from recent releases, with labour market cooling increasingly being driven by firms’ hesitation to hire and create jobs.
The UK employment rate (for people aged 16 to 64 years old) was estimated at 75.1% in the period between November 2025 and January 2026, which is slightly up on the quarter and the year. The UK unemployment rate (for people aged 16 and over) was estimated at 5.2% in the quarter to January 2026, also representing an increase on the quarter and, to a greater extent, the year.
The inactivity rate for people aged 16 to 64 years old was estimated at 20.7% in the three months to January 2026, which is down on both the quarter and the year. The provisional estimate for the number of vacancies in the UK economy in the quarter to February 2026 is 721,000, which is broadly unchanged on the quarter (-6,000) but down on the year (-76,000).
Estimates for payrolled employees in the UK fell by 96,000 (-0.3%) between January 2025 and January 2026 but increased by 6,000 (0.0%) between December 2025 and January 2026. The early estimate of payrolled employees for February 2026 decreased by 49,000 (-0.2%) on the year but increased by 20,000 (+0.1%) on the month, to 30.3 million. The February 2026 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 3.8% in the three months to January 2026, and annual growth in total earnings (including bonuses) was 3.9%. 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 0.4% and 0.5%, respectively, across the same period.
This month’s data suggests that rising business costs remain a top challenge confronting the UK labour market, with many firms struggling to create jobs and help more people to enjoy the benefits of work. The high youth unemployment rate indicates that cost pressures are posing challenges for young people, who are less likely than adults to already be in work.
Many firms will welcome interventions that help address cost barriers to investment and recruitment, such as the Jobs Guarantee. However, the most effective way that government can help businesses to create jobs and drive growth is by tackling the rising cost of doing business. This involves recognising the pressures on firms’ cost base and delivering meaningful Growth and Skills Levy reform that allows businesses to get out what they put into the Levy. It also means being mindful of the problems attached to high business costs when approaching further policy reform.
