Labour Market Statistics, April 2025

Blog posts

15 Apr 2025

Seemanti Ghosh, Principal Research Fellow (Economist)

This briefing sets out analysis of the Labour Market Statistics published this morning. Today’s LFS data covers the period from December 2024 to February 2025. While we discuss the numbers released today, we also briefly review these numbers in the context of recent policy discussions and share our thoughts about the future.

Estimates suggest a modest improvement in employment and inactivity rates, while unemployment remains broadly flat. The UK employment rate for people above 16 years was estimated at 60.7% in Dec 2024-Feb 2025. This is above estimates of a year ago (60.1% for Dec 2023-Feb 2024), and a modest 0.1% increase from last quarter. The unemployment rate for people above 16 years was estimated at 4.4%, which is again higher than a year ago (4.2% for Dec 2023-Feb 2024) but the same as the last quarter. Unemployment has been flat for four consecutive quarters. Economic inactivity for people above 16 years was estimated at 36.5%, which is lower than a year ago (37.2% for Dec 2023-Feb 2024) and down by a modest 0.1% from the last quarter. However, all indicators remain worse than they were before the pandemic. Long-term ill health remains as the predominant reason for worklessness.

Figure 1: Employment, unemployment and economic inactivity rates (%)

Source: Labour Force Survey. Vertical dotted line indicates start of first Covid-19 lockdown.  

Vacancies and payrolled employees continue to fall. Today’s labour market data shows that the estimated number of UK vacancies was 781,000 between Jan 2025-Mar 2025, marking a decrease of 18,000 or -2% from last month and a decrease of 124,000 or -13.7% on the year. The total decrease on quarter (Oct-Dec 2024) is 26,000 or -3.2%. The total number of payrolled employees has decreased by 8,000 between January and February 2025. The provisional data suggests that payrolled employees has fallen by 78,467 between February and March 2025. However, these numbers will be verified next month. The decline in vacancies alongside a drop in payrolled employees suggests a softening UK labour market and caution among employers. Fewer job openings typically indicate sluggish demand, while the fall in payrolled employees signals potential job shedding or slower hiring, possibly due to cost pressures or low business confidence.

We observe sectoral differences in changes in vacancies. The biggest fall in vacancies on quarter has been witnessed by the services sector (-23,000) including hospitality, administration and other services, followed by manufacturing (-5,000). The 2024 Autumn Budget announced increases to employer National Insurance contributions (NICs) and the National Living Wage (NLW) which came into effect in April, and are likely to have a significant impact on low wage sectors, including retail and hospitality (see February Labour Market briefing here). Increased employment costs in these sectors, which tend to employ a disproportionate number of young people, may lead to further increases in NEET rates.

Pay growth is accelerating, overall up by 5.9%, up by 5.9% in private and 5.7% in public sectors. Both regular pay (excluding bonuses and arrears) and real pay appears to be rising. This is well below the heady peaks of 8% growth that we saw a year and a half ago, but as the ONS note, those figures were aided by large public sector pay settlements. Annual growth in employees' average regular earnings excluding bonuses in Great Britain was 5.9% in Dec 2024-Feb 2025, and annual growth in total earnings including bonuses was 5.6%. Annual growth in real terms adjusted for inflation was 2% for regular pay and 1.9% for total pay in Dec 2024-Feb 2025.

Today’s combined figures indicate a cooling labour market, with businesses hesitating to expand or invest in new staff. Overall, the economy remains sluggish and ill health remains the main reason that people are not participating in the labour market. This environment could mean fewer opportunities and increased competition for jobs, especially in entry level positions. Initiatives focussing on the expansion of voluntary employment support such as the launch of the new Connect to Work employment scheme and individually tailored support via the proposed Jobs and Career Service are a positive step. Although the current economic context may reflect broader global uncertainty, it raises immediate wider policy concerns, and this is an urgent call to action for the government to finalise the industrial strategy.