The UK‘s labour market continues to show signs of strain, with employment numbers dipping and job vacancies falling once again, according to the latest data from the Office for National Statistics (ONS).
Figures reveal that the number of employees on payrolls declined by 47,000 in March and an estimated 33,000 in April 2025. This marks a continuing trend of weakness in the job market, with many businesses responding to recent cost increases by slowing recruitment or reducing staff.
The ONS also reported that job vacancies fell by 42,000 between February and April, bringing the total number of unfilled roles down to 761,000.
Analysts suggest this decline is partly due to the increase in the National Living Wage and employer National Insurance contributions, both of which came into force in April.
The unemployment rate also ticked up slightly, rising to 4.5% between January and March 2025, from 4.4% in the previous quarter. However, the ONS has urged caution when interpreting this figure due to lower-than-usual survey response rates, which may affect the accuracy of the data.
Despite these signs of cooling, regular wages—excluding bonuses—grew by 5.6% on an annual basis in the first quarter of the year. While slower than previous months, this rate of wage growth still outpaces inflation, which has eased from its 2022 peak.
Economists say the mixed signals complicate the Bank of England’s monetary policy decisions. Ruth Gregory, deputy chief UK economist at Capital Economics, noted that businesses may be reacting to higher costs by cutting back on hiring.
She added that while wage growth is slowing, it remains strong enough to keep the Bank cautious about further interest rate cuts.
The Bank of England reduced interest rates last week and indicated that more cuts could follow, although Governor Andrew Bailey emphasised a cautious, measured approach.
Policymakers are closely monitoring wage trends, as sustained earnings growth could lead to upward pressure on prices and inflation.
Luke Bartholomew, deputy chief economist at investment firm abrdn (formerly Aberdeen Standard), echoed the cautious outlook. He said the labour market remains resilient despite the financial pressures, but there is clear evidence that tax and wage increases are influencing business behaviour.
A separate employment outlook survey released earlier this week revealed that employer confidence in hiring has reached a new low—excluding the height of the pandemic—with fewer firms expecting to recruit in the months ahead.
The slowdown comes as the UK government faces increasing scrutiny over its economic policies, with some businesses warning that recent tax and wage reforms are making it harder to maintain staffing levels.
The ONS data reflects a broader shift in the UK economy, as companies adjust to rising operational costs, weaker economic growth, and ongoing uncertainty about inflation and interest rates.
