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Introduction: UK unemployment hits highest since early 2021
Good morning. Unemployment across the UK has hit a near five-year high, and wage growth has slowed.
The latest labour market data, just released this morning, shows that the UK jobless rate rose to 5.2% in the October-December quarter.
That’s up from 5.1% in September-November, and the highest rate since the first quarter of 2021.
The number of workers on company payrolls fell too – down by 130,000 over the year and by 46,000 over the quarter.
This follows many months of complaints from businesses that chancellor Rachel Reeves has pushed up employment costs, through increases in national insurance contributions and the minimum wage.
Earnings growth cooled in the quarter too. Basic pay (excluding bonuses) rose by 4.2% in the October-December quarter, down from 4.4% a month ago.
Total earnings (including bonuses) growth also slowed to 4.2%, down from 4.6% in September to November 2025.
ONS Director of Economic Statistics Liz McKeown said:
“The number of workers on payroll fell further in the final quarter of the year, reflecting weak hiring activity, although it is largely unchanged in the latest month. Over the same period the unemployment rate increased, with data showing that more people who were out of work are now actively looking for a job.
“The number of vacancies has remained broadly stable since the middle of last year. Alongside rising unemployment this means that the number of unemployed people per vacancy has increased, reaching a new post-pandemic high. Meanwhile, redundancies are also showing an upward trend.
“Private sector wage growth continues to slow and is at its lowest rate in five years. Public sector pay growth also slowed in the latest period but remains elevated, still affected by some pay awards being implemented earlier in 2025 than 2024, although this effect has now started to diminish.”
The agenda
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7am GMT: UK labour force data
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7am GMT: German inflation report
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9.30am GMT: UK productivity data for Q4 2025
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10am GMT: ZEW’s eurozone economic sentiment survey
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1.30pm GMT: NY Empire State Manufacturing Index
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The ONS also estimate that firms kept cutting workers in January.
Its early, provisional, estimate of payrolled employees for January 2026 shows a decrease of 11,000 within the month, meaning payrolls were 134,000 lower than a year ago.
The rise in unemployment means competition for vacancies is intensifying.
There were 2.6 unemployed people per vacancy in October to December 2025, up from 2.5 in the previous quarter (July to September 2025) and up from 1.9 in October to December 2024.
Pay rose faster in the public sector than at private companies in the last quarter of 2025, today’s labour market report shows.
Annual average regular earnings growth was 7.2% for the public sector, more than twice as fast as the 3.4% increase in the private sector, the ONS reports.
That’s quite a difference… but if you dig into the jobs report, you can see that the public sector annual growth rate is affected by some public sector pay rises being paid earlier in 2025 than in 2024.
That causes a base effect, which should phase out over the next few months.
Real wages rise by just 0.8%
UK pay growth was particularly weak in the last quarter of 2025 once you account for inflation.
Today’s labour market data shows that annual real regular pay (ex-bonuses) rose by just 0.8% in October to December 2025 – that’s using the Consumer Prices Index measure of inflation.
Real pay was last lower than 0.8% in June to August 2023, when it was 0.7%, the ONS reports.
Introduction: UK unemployment hits highest since early 2021
Good morning. Unemployment across the UK has hit a near five-year high, and wage growth has slowed.
The latest labour market data, just released this morning, shows that the UK jobless rate rose to 5.2% in the October-December quarter.
That’s up from 5.1% in September-November, and the highest rate since the first quarter of 2021.
The number of workers on company payrolls fell too – down by 130,000 over the year and by 46,000 over the quarter.
This follows many months of complaints from businesses that chancellor Rachel Reeves has pushed up employment costs, through increases in national insurance contributions and the minimum wage.
Earnings growth cooled in the quarter too. Basic pay (excluding bonuses) rose by 4.2% in the October-December quarter, down from 4.4% a month ago.
Total earnings (including bonuses) growth also slowed to 4.2%, down from 4.6% in September to November 2025.
ONS Director of Economic Statistics Liz McKeown said:
“The number of workers on payroll fell further in the final quarter of the year, reflecting weak hiring activity, although it is largely unchanged in the latest month. Over the same period the unemployment rate increased, with data showing that more people who were out of work are now actively looking for a job.
“The number of vacancies has remained broadly stable since the middle of last year. Alongside rising unemployment this means that the number of unemployed people per vacancy has increased, reaching a new post-pandemic high. Meanwhile, redundancies are also showing an upward trend.
“Private sector wage growth continues to slow and is at its lowest rate in five years. Public sector pay growth also slowed in the latest period but remains elevated, still affected by some pay awards being implemented earlier in 2025 than 2024, although this effect has now started to diminish.”
The agenda
-
7am GMT: UK labour force data
-
7am GMT: German inflation report
-
9.30am GMT: UK productivity data for Q4 2025
-
10am GMT: ZEW’s eurozone economic sentiment survey
-
1.30pm GMT: NY Empire State Manufacturing Index
