Labour Market Statistics, March 2025

Blog posts

20 Mar 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 November 2024 to January 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.

The figures out today show stabilisation of employment, unemployment and inactivity rates. The UK employment rate for people above 16 years was estimated at 60.6% in Nov 2024-Jan 2025. This is above estimates of a year ago (60.2% for Nov 2023-Jan 2024), and the same as the last quarter. The unemployment rate for people above 16 years was estimated at 4.4%, which is again higher than a year ago (4.1% for Nov 2023-Jan 2024) but the same as the last quarter. Economic inactivity for people above 16 years was estimated at 36.6%, which is lower than a year ago (37.3% for Nov 2023-Jan 2024) and down by 0.1% from last quarter. However, all indicators remain worse than they were before the pandemic.

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

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

Vacancies are broadly unchanged. Today’s labour market data shows that the estimated number of UK vacancies was 821,000 between Nov 2024-Jan 2025. The change on quarter is an increase of 1000 or 0.1% and the change on year is a decrease of 108,000 or -11.6%. The 2024 Autumn Budget announced the changes in employer National Insurance contributions (NICs) and the National Living Wage (NLW) due to affect employers from April 2025 and this has had a notable impact on some sectors due to the perceived increase in the financial burden on employers.

While vacancies broadly remain unchanged, there are some sectoral differences. The sectors that have witnessed a fall in vacancies from the last quarter are wholesale and retail trade, motor trade and all service-based sectors such as accommodation and food services, plus administrative and support services. The overall fall in vacancies across these sectors since the announcement is 37,000 from Aug-Oct 2024. We had forecasted these sectors to be most at risk in our February Labour Market Statistics briefing based on historical NIC changes since these are labour intensive sectors. This does raise concerns since these sectors have higher entry level jobs and therefore pose a threat to young people’s employment since these are routes where young people enter. Payroll employees have increased from last quarter by 9,327 but the overall growth remains sluggish.

Pay growth is accelerating, overall up by 5.9%, up by 6.1% in private and 5.3% in public sectors. Both regular pay (excluding bonuses and arrears) and real pay appear 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 was 5.9% in Nov 2024-Jan 2025, and annual growth in total earnings including bonuses was 5.8%. Annual growth in real terms, adjusted for inflation was 2.2% for regular pay and 2.1% for total pay in Nov 2024-Jan 2025.

Today’s figures continue to disappoint and raise immediate wider policy concerns. Overall, the economy remains sluggish and the main reason for worklessness still remains to be ill health. Additionally, Rachel Reeves' announcements in the 2024 Autumn Budget have clearly had a notable impact on employer confidence in some sectors and we see that employers in these sectors are already adjusting business plans to address anticipated cost increases.

In context of the current economic context, Liz Kendall’s announcement this week that proposes changes to accessing ill-health benefits to incentivise employment could exacerbate major challenges, if parallel changes to employment and careers support and to employers’ recruitment strategies do not keep pace. These reforms are part of a broader welfare overhaul aimed at encouraging workforce participation among individuals with long-term health conditions, but supporting more disabled people and people with long-term health conditions into good quality work is even more challenging in the context of a slow economy. This is an urgent call for the government to bring forward activation of the growth plan to ‘Get Britain Working’ to support the proposed changes to the welfare system to work effectively.