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UK jobs market May 2025: "Stagflation could be on the cards as the effects of Labour's NIC increase takes hold"

ended 13. May 2025

The UK unemployment rate for people aged 16 years and over was estimated at 4.5% in January to March 2025. This is above estimates of a year ago, and up in the latest quarter, according to new data published this morning. Other key findings below. Newspage asked recruitment and job market experts for their views, bottom.

  • The estimated number of vacancies in the UK fell by 42,000 on the quarter, to 761,000 in February to April 2025. This was the 34th consecutive quarterly decline with quarterly falls seen in 13 out of the 18 industry sectors. Vacancies were 34,000 below their January to March 2020 level.
  • Annual growth in employees' average regular earnings excluding bonuses in Great Britain was 5.6% in January to March 2025, and annual growth in total earnings including bonuses was 5.5%. RTI pay data showed a similar annual growth rate when compared with Average weekly earnings total earnings, including arrear payments.
  • Estimates for payrolled employees in the UK decreased by 47,000 (0.2%) between February and March 2025 and fell by 63,000 (0.2%) between March 2024 and March 2025.
  • Payrolled employees fell by 53,000 (0.2%) over the quarter and fell by 4,000 (0.0%) over the year, when looking at January to March 2025. This is the period comparable with our Labour Force Survey (LFS) estimates.
  • The early estimate of payrolled employees for April 2025 decreased by 33,000 (0.1%) on the month and decreased by 106,000 (0.3%) on the year to 30.3 million. The April 2025 estimate should be treated as a provisional estimate and is likely to be revised when more data are received next month.

5 responses from the Newspage community

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Editor
Gabriel McKeown
Political & Economics Writer at Sad Rabbit - Substack Newsletter
The UK labour market has hit turbulence as the latest figures revealed a deterioration in employment conditions. The data suggest that the Bank of England's aggressive monetary policy stance thus far has had a more pronounced effect on the labour market than previously thought, setting the path for further rate cuts at its next policy meeting. The combination of rising unemployment and easing wage pressures may allow the BoE to accelerate its rate-cutting timeline from a fairly timid approach currently. Consequently, sterling will likely see a continued reversal of its previous momentum, with a dovish BoE reducing its appeal against major currencies, and the newfound strength in the dollar.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
Lower levels of employment and vacancies are the first signs of the true impact of the government’s tax on jobs. It's now really starting to bite. This is certainly not the recipe for economic growth that is required.
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Scott Gallacher
Director at Rowley Turton
Today’s figures should worry the Chancellor. Stagflation is now a real threat. Labour’s National Insurance hike is squeezing employers, and Starmer’s sudden anti-immigration stance—clearly chasing Reform—risks serious damage to sectors that rely on overseas workers. Reform’s narrative also falls apart: wages are rising, yet unemployment is up. The jobs are there, so the barriers to work are clearly more complex than just benefits
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David Belle
Founder and Trader at Fink Money
This is a bit of a sticky one for the Bank of England as wage growth has once again beat expectations. Stagflation could be on the cards as the effects of Labour's NIC increase takes hold over the next few months, and we are already seeing insolvencies skyrocket. It all ads up to a grim picture for the UK economy. The Labour Party are completely sidelining productvity and they will get found out for it soon. You have to ask who the poor in the nation really are when the minimum wage has risen, the graduate premium collapsed and the middle classes and small businesses are taxed more, all the while welfare increases at an extreme rate of knots.
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Harry Mills
Director at Oku Markets
The UK's unemployment rate rose to a 43-month high of 4.5% in March, according to data released by the ONS on Tuesday morning. Earnings growth rose by 5.6% including bonuses, and 5.5% excluding bonuses, missing and beating expectations respectively. Persistently high wage inflation seems incompatible with lowering inflation, but I would argue that, whilst wage growth presents a feedback loop to inflation, it should continue to ease over time provided the general cost of living stabilises, something currently finely balanced. The tick higher from four straight months of 4.4% unemployment was expected by analysts, and may not exactly represent a surging change in the economy, but the trend is upward. The trend lower for job vacancies coupled with 21% economic inactivity also points to difficult times ahead for the jobs market, productivity and the UK's ability to climb out of anaemic economic growth.