UK labor market cools as wage growth slows, unemployment rises

LONDON -- Britain's labor market showed further signs of cooling in early 2025, as wage growth slowed, unemployment edged higher, and job vacancies continued to decline, according to official data released Tuesday.

Although the Office for National Statistics (ONS) reported that the employment rate stood at 75.0 percent in the first quarter of 2025, which was slightly higher than a year earlier, the unemployment rate was also higher than a year ago.

The number of employees on British company payrolls dropped by 47,000 between February and March, with early estimates indicating a further decline of 33,000 in April. Last month, the total number of payrolled employees stood at 30.3 million.

Meanwhile, wage growth in Britain has continued to moderate. Average weekly earnings excluding bonuses increased by 5.6 percent in the three months to March compared with the same period last year, down from 5.9 percent in the previous quarter. Including bonuses, total pay rose by 5.5 percent year-on-year. After adjusting for inflation, real regular pay grew by 1.8 percent.

The number of job vacancies fell by 42,000 in the three months to April, marking the 34th consecutive quarterly decline. The total number of vacancies now stands at 761,000, slightly below pre-pandemic levels.

Economists attributed the labor market slowdown to multiple factors, including higher payroll taxes and a recent increase in the minimum wage. The retail and hospitality sectors, in particular, saw increased job cuts in March and April.

Despite signs of weakening demand for labor, analysts noted that wage growth remains elevated, posing challenges for the Bank of England's efforts to control inflation.

The Bank of England lowered its benchmark interest rate by 0.25 percentage points to 4.25 percent earlier this month. However, policymakers have stressed the need for more evidence of easing inflation before further rate cuts.

The ONS also acknowledged improvements in its Labour Force Survey data collection, though response rates remain below pre-pandemic levels, limiting the granularity of some estimates.

Analysts believe that the cooling job market in the country reflects pressures from both domestic policy adjustments, and global trade uncertainties weighing on business confidence.