The rising unemployment rate, coupled with a noticeable slowdown in wage growth, presents a challenge for the Labour government. Although efforts are underway to tackle youth unemployment and support job creation, the recent data suggests that the UK’s economic recovery remains fragile, with further hurdles ahead.
Unemployment and Declining Job Openings: A Bleak Outlook for Job Seekers
According to the latest ONS data, the unemployment rate for the three months leading up to October 2025 reached 5.1%, up from 5% in September. This marks the highest level since the first quarter of 2021, and the highest since 2016 if the COVID-19 pandemic period is excluded. The number of employees on payrolls also decreased by 22,000 in September, with an additional drop of 38,000 estimated for November, indicating a weak labour market.
The decline in job vacancies has been another key factor. In the three months to November, vacancy numbers fell by around 77,000 compared to the previous year, a clear sign of reduced hiring activity. Liz McKeown, director of economic statistics at the ONS, highlighted that businesses are responding to lower demand and rising costs by curtailing recruitment. This has been particularly hard on younger workers, who have seen fewer job opportunities, further deepening concerns over long-term youth unemployment.
The recent figures reflect a broader trend of economic instability. “The overall picture continues to be of a weakening labour market,” McKeown said, adding that businesses are reporting fewer jobs available. Analysts suggest that the combination of higher national insurance contributions and the increase in the National Living Wage has made hiring more expensive for employers, prompting many to slow down recruitment or reduce staff numbers.
Labour’s Response and Economic Challenges Ahead
In response to the rising unemployment, Labour ministers have sought to reassure the public by pointing to initiatives aimed at boosting employment. Work and Pensions Secretary Pat McFadden emphasised that the rate of inactivity has dropped to its joint lowest level in five years, with over 350,000 more people in work compared to the previous year. The government is also investing £1.5 billion to create 50,000 apprenticeships and 350,000 new job opportunities for young people, which it hopes will provide a pathway into stable employment.
However, the government’s response is met with scepticism from some quarters. Shadow Business Secretary Andrew Griffith criticised Labour’s economic policies, arguing that higher taxes and increased regulations have raised the cost of hiring, pushing employers to reduce their workforce. Griffith contended that these policies are contributing to the economic difficulties currently facing the UK labour market.
Despite these efforts, the outlook remains uncertain. The UK economy faces challenges on multiple fronts, including subdued wage growth, which slowed to 4.6% in the three months to October, down from 4.7% in the previous period. Analysts are also concerned about the broader economic climate, with inflationary pressures and high financing costs continuing to affect business confidence.
While the government prepares for the upcoming budget, the rising unemployment rate and economic uncertainty will likely remain at the forefront of political debates. With public sector employment rising to record levels and private sector job creation slowing, policymakers will need to navigate a complex landscape to foster sustainable job growth in the face of ongoing challenges.
