UK Job Losses Rise to Highest in 5 Years, Pay Grows Slower

The number of people without jobs in the UK has gone up to 5.2%, which is the highest it's been in almost five years. At the same time, people's pay is not growing as fast as before. This suggests the economy is slowing down.
By Newsroom | UK Economy, Employment |

The United Kingdom's job market shows signs of strain as the unemployment rate has reached 5.2%, a level not seen in nearly five years. This increase coincides with a slowdown in wage growth, suggesting a cooling economy. Official figures from the Office for National Statistics (ONS) indicate a shift in the labor landscape, with more people seeking work and businesses potentially re-evaluating hiring practices due to increased costs and a tighter economic environment.

Economic Landscape Under Pressure

The latest labor market data reveals a notable uptick in unemployment, reaching 5.2% in the three months to December 2025. This marks the highest rate since early 2021, excluding the pandemic period, and surpasses economists' expectations, which largely predicted the rate to remain at 5.1%. The ONS reported that this figure rose from 5.1% in the previous three-month period, highlighting a clear upward trend.

Read More: UK Jobs Get Harder to Find, More People Unemployed

UK unemployment rate hits five-year high of 5.2% as wage growth cools - 1

Simultaneously, the pace of annual wage growth has decelerated, falling to its lowest point in almost four years. This cooling wage growth, combined with increased unemployment, signals a more challenging environment for both workers and employers. The number of unemployed individuals per job vacancy has also reached a post-pandemic high, indicating a more competitive job market for those seeking employment.

Factors Influencing the Labor Market

Several factors appear to be influencing the current state of the UK's labor market. Businesses are reportedly grappling with higher operating costs, which has led some to slow down hiring and reduce the replacement of outgoing staff. The ONS noted that the increase in employer National Insurance contributions and the rise in the minimum wage, enacted following Chancellor Rachel Reeves' 2024 Budget, have contributed to businesses' cautious approach to recruitment.

Read More: UK Interest Rates Might Be Cut Soon as More People Are Unemployed

UK unemployment rate hits five-year high of 5.2% as wage growth cools - 2

The softening labor market has also led to increased redundancies. Concerns have been raised about the impact of government policies on specific worker groups, such as younger individuals. Businesses have indicated that changes to minimum wage structures, specifically the creation of a single adult rate, might make them less inclined to hire young workers with limited experience.

Conflicting Views on Wage Growth and Policy Impact

While the overall trend points to a cooling labor market, there are differing interpretations of the economic signals. Some analyses suggest that the easing wage growth will provide reassurance to the Bank of England regarding inflationary pressures, potentially influencing decisions on interest rates.

UK unemployment rate hits five-year high of 5.2% as wage growth cools - 3

However, the impact of government fiscal policies, such as changes to employer contributions and minimum wage, is seen by some as directly contributing to the slowdown in hiring, particularly for entry-level positions. The gap between private and public sector wage growth remains a point of observation, with further details expected in future ONS reports.

Official Data and Expert Commentary

The Office for National Statistics (ONS) provided the core data, confirming the unemployment rate at 5.2% for the three months ending December 2025. Liz McKeown, ONS Director of Economic Statistics, stated, "We’ve published the latest labour market figures," in response to the data release.

Read More: UK Jobs Market Slows Down: More People Unemployed, Wages Grow Slower

UK unemployment rate hits five-year high of 5.2% as wage growth cools - 4

  • Unemployment Rate (Oct-Dec 2025): 5.2% (seasonally adjusted, aged 16 and over)

  • Previous Quarter (Sept-Nov 2025): 5.1%

  • Highest Since: Three months to January 2021 (excluding pandemic era, highest in over a decade)

  • Annual Wage Growth (Oct-Dec 2025): 4.2% (regular pay, down from revised 4.4% in the previous quarter)

  • Real Wage Growth (Oct-Dec 2025): 0.8% higher after accounting for CPI inflation.

Martin Beck, chief economist at WPI Strategy, commented that higher labor costs are a significant factor affecting entry-level hiring. Alex Hall-Chen from the Institute of Directors highlighted that the 5.2% unemployment figure underscores the "fragility of the jobs market." Yael Selfin, chief economist at KPMG, suggested that the data would confirm to rate-setters that pay pressures are indeed easing.

Conclusion and Future Outlook

The latest official figures paint a picture of a UK labor market facing increased headwinds. The rise in unemployment to a five-year high, coupled with decelerating wage growth, suggests a weakening demand for labor. Businesses appear to be navigating a complex economic environment, influenced by increased costs and policy changes, leading to a more cautious approach to hiring.

The data also indicates that getting a job has become more challenging, with a higher number of unemployed individuals competing for available vacancies. The cooling of wage pressures may influence monetary policy, but the overall economic implications of a tightening job market warrant continued observation. Future reports from the ONS will be crucial in tracking the trajectory of these trends.

Sources

Frequently Asked Questions

Q: What is the current unemployment rate in the UK?
The unemployment rate in the UK is now 5.2%. This is the highest it has been in almost five years.
Q: Why is unemployment going up?
Some businesses are finding it harder to pay for things, like higher wages and costs. This makes them hire fewer people.
Q: Is pay growing slower?
Yes, people's pay is growing slower than before. This means people have less extra money to spend.
Q: What does this mean for the economy?
It means the economy might be slowing down. It could be harder for people to find jobs and for businesses to grow.