The UK labour market continues to send out mixed signals. The unemployment rate remains stable and there has been sustained wage growth across the economy. But vacancies are falling steadily, having recently slipped below pre-pandemic levels.
New data from the Office for National Statistics (ONS) show that unemployment in the UK is at 4.4%, unchanged from the three months to January 2025. Nominal wages have continued to grow at 6% a year, with real wages rising more modestly, at 2%. Vacancies fell by 16% compared with the previous month, with decreases recorded in 15 out of 19 sectors. Redundancies have levelled off after five consecutive months of decline.
Although the recent increases in national insurance contributions (NICs) and the national minimum wage – introduced on 6 April 2025 – are not yet reflected in the latest data release (due to the usual one-month lag, depending on the metric), there are early signs that some firms may have anticipated the higher labour costs. The continued drop in vacancies and higher redundancies point to potential pre-emptive adjustments by employers. Future tax increases affect current hiring decisions.
The new figures show that the number of people in employment in the UK has increased in recent months. Between December and February 2025, the number of the employed aged 16 and over reached 34 million – 74,000 more than the previous month; and 683,000 more than a year ago (December 2023 to February 2424). At 75%, the employment rate for 16-64-year-olds remains stable. The unemployment rate has held steady for the fourth consecutive month, at 4.4% (although the rate this time last year was slightly lower, at 4.2%).
Provisional estimates for March 2025 indicate that the number of payrolled employees stood at 30.3 million – a decrease of 70,300 employees over the past year. Compared with the previous month, payrolled employees decreased by 0.3% in March 2025 –78,400 fewer people.
In terms of wages, average weekly earnings (or ‘AWE’) – including (total) and excluding (regular) bonuses – continue to rise. Total median weekly pay reached £716, while regular pay hit £670. Figure 1 illustrates the consecutive rise in AWE over the past four years. Continuing this trend, annual average nominal wages rose 5.6% for total pay and 5.9% for regular pay.
But what about the growth of real wages – that is, pay increases minus inflation? After a period of decline throughout 2022 and early 2023, real wage growth returned in mid-2023. This encouraging trend persists, with the latest data showing a real wage increase of around 2% for both total and regular earnings (see Figure 1).
Figure 1: Annual growth rate of average weekly earnings, total and regular pay (nominal versus real)
Source: Author’s calculations using ONS labour market data.
Focusing on specific parts of the economy, annual nominal regular wage growth remains positive across all ONS categories. The wholesale sector leads the way at 6.8%, followed by construction (6.2%) and services (6%).
After peaking in 2023, most sectors experienced a decline in wage growth during 2024. Annual wage growth in the finance and manufacturing sectors has decreased since mid-2023, placing them at the lower end of sectoral growth rates.
In contrast, the construction sector has shown a sustained increase in wage growth since early 2024 (see Figure 2). In January 2025, the sector not only recorded the second-highest annual wage growth (just below wholesale), but also ranked second in terms of regular AWE, reaching £762 per week, just behind finance (at £849).
Figure 2: Annual growth rate of average weekly earnings, regular pay by sector seasonally adjusted values
Source: Author’s calculations using ONS labour market data.
Note: The three-month average figures are the changes in the average seasonally adjusted values for the three months ending with the relevant month compared to the same period a year earlier.
With the increases in both NICs and the minimum wage in April 2025, overall vacancies continue to decline. According to the latest data, the number of new jobs was 781,000 between January and March 2025 – a 16% drop compared with the same period last year, and a 2% decrease compared with the previous month (see Figure 3).
The sustained decline in total vacancies has brought the number below pre-pandemic levels (the figure was 819,000 in the three months from November to January 2020). Compared with October to December 2024 (quarterly change), vacancies fell in 15 of the 19 industry groups. On an annual basis, 17 out of 19 sectors experienced a reduction in new hires.
The construction sector is one of the few industry groups that have experienced a rise in vacancies in the most recent period. According to the latest ONS figures, construction had the largest quarterly increase in new hires over the last quarter (see Figure 4). This increase may be driven by government initiatives to boost housing construction and invest in roads, rail and energy infrastructure. Falling interest rates and rising property prices may also have played a part, encouraging new builds as well as renovations.
Figure 3: Total vacancies
Source: Author’s calculations using ONS labour market data.
Figure 4: Annual change and quarterly change (%) in vacancies, by sector
Source: Author’s calculations using ONS labour market data.
Redundancies fell for the first time after five consecutive months of increases. Between December and February 2025, a total of 117,000 people were made redundant – a decrease of 7,000 compared with the previous month, but an increase of 7,000 compared with the same period last year (see Figure 5). (Note: the redundancy level is the number of people who were made redundant in the three months prior to being interviewed; the figure is not seasonally adjusted).
Figure 5: Redundancies levels, 2019-25
Source: Author’s calculations using ONS labour market data.
The UK labour market continues to perform relatively well in comparison with the rest of the G7 (see Table 1). In terms of the employment rate, at 75%, the UK is in the top three, behind only Japan and Germany. And with an unemployment rate of 4.4%, the UK ranks fourth, behind Japan, Germany and the United States, but ahead of France, Canada and Italy.
Table 1: International comparisons
| Time period | Unemployment rate (people aged 15 and over, %) | Employment rate (people aged 15-64, %) | |
| UK | Q4 2024 | 4.4% | 74.9% |
| United States | Q1 2025 | 4.1% | 71.9% |
| Canada | Q1 2025 | 6.6% | 74.3% |
| Japan | Q4 2024 | 2.5% | 79.8% |
| France | Q4 2024 | 7.3% | 68.9% |
| Germany | Q4 2024 | 3.4% | 77.6% |
| Italy | Q4 2024 | 5.8% | 62.2% |
Source: Author’s calculations using ONS labour market data.
Note: The lower age limit for the UK and United States is 16 rather than 15.
The latest figures reinforce the trends observed over the past few months: businesses appear to have anticipated rising labour costs stemming from the increases in NICs and the minimum wage. As a result, vacancies have declined at a faster pace, dropping below pre-pandemic levels.
Despite the broad decline in vacancies across most sectors over the past quarter, government efforts to stimulate the construction sector – through house-building targets and infrastructure investment – may be starting to show in the labour market data. Rising vacancies in construction suggest growing employer demand and increased activity within the sector.
Looking ahead, the next labour market data releases will provide insight into the impact of the increases in NICs and the minimum wage. The scheduled rises in the minimum wage and public sector pay are likely to push up wages across the economy, particularly in lower-paid sectors. This has the potential to have a further influence on hiring patterns for specific groups, such as younger workers.
International factors may also become visible in next month’s data release. Broader macroeconomic risks – such as trade tensions between the United States and its partners, or new tariffs on key imports – could dampen UK business sentiment and affect investment decisions, with delayed yet significant consequences for employment figures.
Any such shifts are likely to be clearer in the labour market data by May or June, and they will help economists and policy-makers to evaluate the impact of increased protectionism in Washington on UK jobs and pay.
Where can I find out more?
To learn more about the dynamics of the labour market, explore other recent articles from the Economics Observatory:
- What do we know about labour market power in the UK
- Good work what do we know about the quality of UK jobs
- What share of the economic pie goes to workers?
