Employment and unemployment levels continue to rise, while vacancies fall to lowest level in almost four years.
In the three months to February 2025, wage growth across the economy showed signs of plateauing but remains strong, unemployment and employment levels both increased, while inactivity fell but is still stubbornly high. The labour market picture is therefore broadly the same, and addressing labour market challenges and barriers continues to be imperative.
The UK employment rate (for people aged 16 to 64 years) was estimated at 75.1% in the period between December 2024 and February 2025, which is slightly up on the quarter and the year. The UK unemployment rate (for people aged 16 and over) was estimated at 4.4% in the three months to February 2025, which is unchanged on the quarter and slightly up on the year.
The UK economic inactivity rate for people aged 16 to 64 years was 21.4% in the quarter to February 2025, marginally down on the year and the quarter. The estimated number of vacancies in the UK decreased by 26,000 to 781,000 in the period between January and March 2025. Following the revision of the initial estimate for December 2024 to February 2025, this was the 33rd consecutive quarterly decline. According to ONS' estimates, this is the lowest level recorded since March to May 2021.
Estimates for payrolled employees in the UK decreased by 8,000 (0.0%) between January and February 2025 but rose by 35,000 (0.1%) between February 2024 and February 2025. The early estimate of payrolled employees for March 2025 decreased by 78,000 (0.3%) on the month and decreased by 70,000 (0.2%) on the year to 30.3 million. The March 2025 estimate should be treated as a provisional estimate and is likely to be revised when more data is received next month.
Annual growth in employees' average regular earnings (excluding bonuses) in Great Britain was 5.9% in the three months to February 2025, and annual growth in total earnings (including bonuses) was 5.6%. Annual growth in real terms (adjusted for inflation using the Consumer Prices Index including owner occupiers' housing costs (CPIH)) for regular pay and total pay both stood at 2.1% and 1.9%, respectively, across the same period.
Some of the labour market changes that have been observed in recent months, including rising wage growth, are showing signs of abating. Other stories, such as creeping levels of youth unemployment and simultaneous increases in employment and unemployment levels, have continued. There are also new stories emerging, such as the drop in vacancies which has occurred against the backdrop of an approaching National Insurance Contributions' (NICs) rise. But the core policy message is unchanged: businesses and policymakers must work together to address the labour market challenges that threaten employers' ability to develop their workforce and deliver productivity-led growth. Positively, the Government can act now to support businesses' ability to retain and recruit new talent and adjust to the new labour market model which will be defined by a smaller workforce. This includes working through the unintended consequences presented by the Employment Rights Bill to avoid high compliance costs crowding out key business investments in technology and training, as well as creating a long-term strategy for Growth and Skills Levy reform which allows businesses to spend their full Levy pots while protecting SME provision.
