The UK’s job picture has cooled further, with unemployment nudging up to 5.1% in the three months to October, according to the Office for National Statistics. This marks a rise from 5% in the prior quarter and places the jobless total at its highest level since January 2021, just shy of the peak seen during the Covid-19 era.
ONS describes the labour market as subdued, even as wages continue to rise. Average pay, excluding bonuses, grew by 4.6% from August to October 2025. However, trends diverged by sector: private-sector earnings slowed from 4.2% to 3.9%, while public-sector pay accelerated from 6.6% to 7.6% in the same period.
Even with rising wages, overall compensation is still above the rate of price growth in the economy. On the employment side, the number of people on company payrolls fell by 149,000 in October year on year, a 0.5% drop, highlighting weaker hiring activity.
Liz McKeown, the ONS director of economic statistics, called the data indicative of a weakening labour market, noting that payroll employment has fallen again.
Young people are bearing the brunt of the slowdown. In the three months to October, unemployment among 18- to 24-year-olds rose by 85,000, the largest jump since November 2022. In response, the government said it would launch an inquiry into youth unemployment and inactivity.
Meerah Nakaayi, a 22-year-old Londoner who completed a two-year policy apprenticeship and spent two years in the field, has been out of work since June. She described six months of mounting frustration and demotivation, noting that competition is fierce: one policy-analyst role drew 290 applications.
Industry observers are vocal about the wider implications. James Reed, CEO of Reed Recruitment, summed up a common concern: all primary labour-market indicators appear to be heading in the wrong direction, and he questioned whether the bottom has been reached. He also pointed out that the minimum-wage hike in the Budget, though welcome for workers, may deter employers from hiring at entry levels.
Policy changes are afoot. The government plans to end the two-tier minimum wage and establish a single rate for all adults, a move many businesses say could dampen hiring of younger or less-experienced workers. Yael Selfin, chief economist at KPMG UK, cautioned that hiring prospects for younger workers remain weak, and noted that the slowdown in private-sector wage growth reflects a broader drop in hiring activity. She also suggested the latest figures lend some support to the case for a Bank of England base-rate cut in the near term.
In response to the ONS data, Work and Pensions Secretary Pat McFadden acknowledged the scale of the challenge and highlighted government measures, including £1.5 billion to fund 50,000 apprenticeships and 350,000 new workplace opportunities for young people to gain real experience. By contrast, shadow work and pensions secretary Helen Whately criticized the government for pursuing “growth-killing” policies that could result in job losses as the holiday season approaches, warning that fourteen consecutive months of higher unemployment will strain thousands of families through Christmas and into the New Year.
But here’s where it gets controversial: with unemployment stubbornly high and wage growth uneven, debates will intensify about whether policymakers should prioritize stimulus to spur hiring or targeted support to protect workers in the short term. Do you think the right move is to push for more employer incentives and wage flexibility, or to strengthen protections and public-sector hiring to stabilize the labor market? Share your views in the comments.
