Labour market statistics for August 2025: REC's reaction
UK Labour Market Shows Modest Growth Amidst Ongoing Challenges
The UK labour market is displaying signs of modest growth in employment, but businesses continue to face challenges and persistent wage pressures, according to recent statistics.
As of mid-2025, the employment rate has increased to 75.3%, up 0.3 percentage points from the previous quarter and 0.7 percentage points over the year. This growth is primarily driven by full-time employment gains and a rise in people holding second jobs [1][2]. However, the unemployment rate has edged slightly higher to 4.7%, while economic inactivity has declined to 21.0% [1].
The hiring trends suggest a still somewhat tight labour market, with fewer unemployed people per vacancy (2.2) than the long-run average (2.8). Although wage growth has eased somewhat, it remains strong, contributing to ongoing inflationary concerns [3][5]. The number of payrolled employees showed a slight decline of 0.5% over the year to June 2025, indicating some caution amongst employers in expanding payrolls despite demand [4].
Businesses across sectors are finding it challenging to balance recruitment needs with wage pressures and cost inflation. Tight labour market conditions mean firms may struggle to fill vacancies, increasing recruitment costs and potentially constraining growth.
To help businesses manage these rising costs, the UK Autumn Budget aims to provide relief. Although specific details are not yet available, such budgets typically focus on measures such as tax adjustments, support for energy costs, and incentives for hiring or training to ease pressures on employers facing wage inflation and operational costs. Supporting labour market stability and improving business cost structures is likely a key focus given current market conditions.
One positive trend in the UK labour market is the fall in economic inactivity [6]. This decline is a promising sign, indicating more people are participating in the workforce, which could further boost employment growth in the future.
In conclusion, the UK labour market in mid-2025 is characterized by modest employment growth with tight hiring conditions and persistent wage pressures posing challenges for businesses. The Autumn Budget plays a strategic role in addressing these cost pressures to support both employers and the broader economy.
References: [1] Office for National Statistics (2025). [Labour Market Statistics]. [online] Available at: https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployment rates/bulletins/uklabourmarket/latest
[2] Office for National Statistics (2025). [Labour Market Statistics: April to June 2025]. [online] Available at: https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployment rates/bulletins/uklabourmarket/apriltojune2025
[3] Bank of England (2025). [Monetary Policy Report]. [online] Available at: https://www.bankofengland.co.uk/monetary-policy/inflation-report/2025/july
[4] HM Revenue & Customs (2025). [Payroll Employment]. [online] Available at: https://www.gov.uk/government/statistics/uk-labour-market-statistics-december-2024/uk-labour-market-statistics-december-2024
[5] Resolution Foundation (2025). [Living Standards Outlook]. [online] Available at: https://www.resolutionfoundation.org/publications/living-standards-outlook/
[6] Office for National Statistics (2025). [Labour Market Statistics: Economic Inactivity]. [online] Available at: https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/economicinactivity/bulletins/uklabourmarket/latest
Businesses in the UK are grappling with a challenging labor market, where tight conditions are causing issues with recruitment and inflating wages, contributing to ongoing operational costs. The strategic Autumn Budget aims to support businesses by addressing these cost pressures and providing relief measures, potentially including tax adjustments, energy cost support, and hiring or training incentives.
