The UK's labour market has shown clear signs of softening, with official data revealing the highest unemployment rate since the first quarter of 2021.
Key Figures Point to a Subdued Market
According to the Office for National Statistics (ONS), the unemployment rate rose to 5.1% in the three months leading up to October. This marked an increase of 0.1 percentage points from the previous quarter. Excluding the turbulent pandemic period, this represents the highest level of joblessness seen since early 2016.
The data, released on Tuesday 16 December 2025, also showed a concerning drop in the number of people on company payrolls. In November alone, payroll employment fell by 38,000, bringing the total to 30.3 million. The statistics indicate that younger workers are being disproportionately affected by the current downturn.
Wage Growth Slows Amid Economic Pressure
Alongside rising unemployment, the pace of wage growth has also begun to cool. Average regular earnings growth, excluding bonuses, slowed to 4.6% in the three months to October. However, when adjusted for inflation, this still meant a real-terms increase of 0.9% for workers.
The ONS characterised the overall state of the jobs market as "subdued." This assessment adds to the growing economic pressure on policymakers and increases speculation that the Bank of England may consider an interest rate cut to stimulate activity.
Political Response and Future Outlook
Chancellor Rachel Reeves responded to the figures with a defiant message about her tenure. She stated her intention to remain in the role for years to come, signalling a long-term approach to navigating the economic challenges.
The combination of rising unemployment, falling payroll numbers, and slowing pay growth paints a picture of a UK economy facing significant headwinds. All eyes will now be on the government's next move and the Bank of England's Monetary Policy Committee as they weigh their options in the new year.
