The UK’s unemployment rate has risen to its highest level in four years, while the number of job vacancies has fallen, as the jobs market continues to show signs it is weakening.
Unemployment figures rose to 4.7 per cent in March to May, up from 4.5 per cent in the previous three months to April, according to the latest ONS labour market data.
Meanwhile, the estimated number of vacancies dropped by 56,000 in the quarter to 727,000 between April and June 2025 – the lowest level seen since 2015, excluding the Covid pandemic period. This marked the 36th consecutive period where vacancy numbers have declined.
“Today’s data indicates that the labour market is cooling off, reducing recruitment pressures on employers,” said James Cockett, senior labour market economist at the CIPD, but he warned that, on the flip side, the jobs market was becoming more challenging for candidates.
The number of unemployed people per vacancy increased to 2.3 over the March to May period, up from two in the previous quarter, representing the highest level since early 2016, not including the disruption caused by the pandemic.
The annual rate of pay growth over this quarter decreased to 5 per cent, from 5.2 per cent in the previous three months.
Estimates for payroll employees also declined by 135,000 between May 2024 and May 2025, and by 25,000 between April and May 2025.
Cockett added that current challenges in the job market were particularly pronounced for the younger generations. “It’s vital that young people aren’t left behind and are given every opportunity to get into work at the outset of their working lives,” he said.
The CIPD is calling on the government to introduce an apprenticeship guarantee for all 16 to 24 year olds, to provide opportunities for young people to “both learn and earn”.
This should be supported by enhanced financial incentives for small businesses to help them tackle increased employment costs, Cockett suggested.
Jim Moore, employee relations expert at legal services firm Hamilton Nash, said the decline in vacancies was mostly attributable to employers scaling back their hiring plans because of the current economic uncertainty.
The increase in unemployment could signal that the labour market was now in a “definite recession”, he added.
“Increases in employer NICs and the prospect of the employment rights bill adding to the costs of employment have put a stranglehold on job growth,” Moore explained.
“This is likely to continue unless the government is able to change direction and stimulate an economic environment that is more pro-employment.”
Neil Carberry, chief executive of the Recruitment & Employment Confederation, said: “Many firms are choosing to operate leaner in response to the current situation.”
He added that this was most evident in the private sector, where temporary work outperformed other forms of hiring as firms sought flexibility.
An interest rate cut next month and measures to improve business confidence – including reassurances that firms would not face another “swingeing tax raid” in the budget – could help strengthen the labour market, according to Carberry.
“We should not let pessimism take hold,” he said. “If the government can increase businesses’ and families’ willingness to spend for the future, we would likely see a positive trend in both the labour market and the wider economy.”
