The UK's labour market has shown clear signs of cooling, with official figures revealing the unemployment rate has climbed to a new four-year high. The latest data from the Office for National Statistics (ONS) places the focus firmly on the Bank of England's upcoming interest rate decision.
Key Figures Point to a Weakening Market
According to the ONS, the UK unemployment rate rose to 5.1% for the three months covering August to October 2025. This marks an increase from 5% in the previous period and represents the highest level recorded since the quarter ending in January 2021.
The rise in unemployment was driven by a sustained fall in the number of employees on company payrolls. The data shows a reduction of 149,000 payroll employees between October 2024 and October 2025, with a drop of 22,000 occurring in October alone. This trend indicates subdued hiring activity across the economy.
Wage Growth Slows as Pressure Eases
Accompanying the softening jobs market, the pace of wage growth has also decelerated. Average regular earnings, which exclude bonuses, increased by 4.6% in the latest quarter, down from 4.7% a month earlier. Growth in total pay, which includes bonuses, also slowed, falling to 4.7% from 4.9%.
This cooling in pay growth is a critical indicator for policymakers. The slowdown may encourage the Bank of England's Monetary Policy Committee to consider cutting interest rates when it meets on Thursday, as one of the key drivers of persistent inflation shows signs of moderating.
Official Commentary and Wider Context
Liz McKeown, Director of Economic Statistics at the ONS, stated that the overall picture is one of a weakening labour market. "The number of employees on payroll has fallen again, reflecting subdued hiring activity, while firms told us there were fewer jobs in the latest period," she said.
McKeown further noted, "This weakness is also reflected in an increase in the unemployment rate, while vacancies remained broadly flat. The fall in payroll numbers and increase in unemployment has been seen particularly among some younger age groups."
The UK data arrives on a day when global attention is also on the delayed US non-farm payroll report for November. This key American jobs report, postponed due to a US government shutdown, will provide a crucial health check on the other side of the Atlantic.
The agenda for the day also includes flash PMI reports for December from both the Eurozone and the UK, offering the first snapshot of business activity this month, alongside US retail sales figures for October.
