UK Labour Market Sees Rising Unemployment and Slowing Wage Growth in Late 2025
The UK has experienced an increase in unemployment, reaching a four-year high of 5.1% for the three months to October 2025, representing a rise of 0.8 percentage points year on year. The employment rate correspondingly fell by 0.3 percentage points to 74.9% during the same period. Youth unemployment among 18 to 24-year-olds rose to 546,000, the highest since 2015, marking an increase of 85,000 on the previous quarter.
Inactivity remains at 21%, with health-related inactivity continuing to be significant but not the main driver of recent deterioration. Payrolled jobs growth turned negative in March 2025, with an early November flash estimate indicating a year-on-year decline of 0.6%, the fastest decrease since the start of the COVID-19 pandemic.
Regular pay growth has slowed to 4.6% in the Office for National Statistics (ONS) main series, down from 5.9% in late 2024. Real-time data shows a decrease to 2.7% in October from 3.7% in September. This softening wage growth may ease Bank of England concerns and potentially support a pre-Christmas interest-rate cut.
In the policy context, the Labour party aims to equalise the minimum wage for younger workers with the adult rate in the upcoming April rise. However, some observers question the timing of this measure given the current economic slowdown.
