UK jobs market continues to weaken as unemployment hits four-year excessive and wage progress slows

Introduction: UK unemployment fee hits 5.1%

Good morning and welcome to our rolling protection of enterprise, the monetary markets and the world financial system.

Jobs stories from from each side of the Atlantic are in focus in the present day, as we get our ultimate well being verify on the labour markets within the UK and the US.

And the breaking information is that Britain’s unemployment fee has hit a brand new four-year excessive, as companies proceed to chop jobs.

The UK’s unemployment fee has risen to five.1% within the August-October interval, up from 5% a month in the past, to its highest stage for the reason that three months to January 2021.

Unemployment rose, once more, because the variety of folks on firm payrolls fell; by 149,000 between October 2024 and October 2025, and by 22,000 in October alone.

The ONS additionally estimates that payrolled staff for November 2025 decreased by 171,000 on the 12 months, and by 38,000 (0.1%) on the month, to 30.3 million.

And with the roles market cooling, wage progress has slowed once more too.

Common earnings, excluding bonuses, rose by 4.6% within the quarter, down from 4.7% a month in the past. Whole pay progress (together with bonuses) slowed to 4.7% from 4.9%.

That weakening in pay progress might encourage the Financial institution of England to chop rates of interest on Thursday.

ONS director of financial statistics Liz McKeown mentioned:

“The general image continues to be of a weakening labour market. The variety of staff on payroll has fallen once more, reflecting subdued hiring exercise, whereas companies advised us there have been fewer jobs within the newest interval.

“This weak spot can be mirrored in a rise within the unemployment fee, whereas vacancies remained broadly flat. The autumn in payroll numbers and improve in unemployment has been seen notably amongst some youthful age teams.

Later in the present day we’ll lastly get the delayed US non-farm payroll report for November, displaying what number of jobs have been created final month. This report was held up by the US authorities shutdown, which additionally meant October’s report was cancelled.

The agenda

7am GMT: UK labour market report
9am GMT: Eurozone flash PMI report for December
9.30am GMT: UK flash PMI report for December.
10am GMT: Eurozone commerce stability report for October
1.30pm GMT: US non-farm payroll jobs report for November
1.30pm GMT: US retail gross sales for October

Key occasions

Thursday rate of interest minimize ‘extremely doubtless’ as jobs market slows

At the moment’s jobs report bolsters the case for the Financial institution of England to chop rates of interest on Thursday, and once more in 2026, economists say.

With unemployment its highest in virtually 4 years, and wage progress slowing rapidly, the Metropolis is assured the Financial institution will minimize rates of interest from 4% to three.75% at its ultimate assembly of the 12 months.

Final month, the Financial institution cut up 5-4 when it determined to not minimize charges, so solely a type of 5 policymakers want to change….

Richard Carter, head of mounted curiosity analysis at Quilter Cheviot, says in the present day’s jobs figures make a minimize appear all of the extra doubtless.

“At November’s assembly, the MPC was cut up virtually down the center, and Andrew Bailey’s deciding vote noticed charges held. Nevertheless, with the financial system shrinking – largely because of the current price range and its affect on client confidence, spending and enterprise planning – and the outlook for progress slightly bleak, a minimize is seeming extra doubtless this time round.
“The Financial institution remains to be strolling a tightrope. Whereas it would need to spur some progress, it gained’t need to inadvertently add to inflationary pressures. Nonetheless, ought to inflation are available decrease as anticipated tomorrow, a fee minimize may properly be ticked off everybody’s Christmas checklist.”

ING’s James Smith predicts a minimize on Thursday, and two extra subsequent 12 months:

Altogether, slowing wage progress mixed with additional indicators of cooling within the wider jobs market hints on the UK turning into much less of an outlier on inflation. A fee minimize on Thursday is extremely doubtless, and we count on two additional strikes within the first half of 2026.

Philip Shaw of Investec factors out that pay progress, the Financial institution of England’s favoured measure, slowed – with personal sector earnings ex-bonuses slipping to three.9% within the three months to October from 4.2% within the three months to September.

By itself this report doesn’t present a case for a minimize within the Financial institution fee on Thursday, however it goes a great distance in direction of demonstrating that long-term inflation pressures have gotten extra subdued. A 25bp minimize within the Financial institution fee to three.75% on Thursday continues to look very doubtless.

Kathleen Brooks, analysis director at XTB, additionally cites the personal sector wage progress figures as a cause to chop:

Wage progress moderated barely, led by the personal sector. Personal sector wage progress fell under the 4% deal with to three.9% YoY, the bottom stage since 2020. Public sector wage progress continues to outpace the personal sector, and common weekly earnings moderated solely barely to 4.7% from 4.9% in September.
This was hotter than anticipated, however we don’t see this as an obstacle to a Financial institution of England fee minimize later this week. The BOE will look extra intently at pay progress within the personal sector, and that is moderating to a extra affordable stage at a comparatively quick tempo. This provides to proof that UK inflation peaked in September, and may give nearly all of MPC members the arrogance to chop charges.

Deutsche Financial institution: Peak Funds uncertainty hits labour market

There are worrying indicators within the labour market proceed as we head in direction of Christmas, warns Sanjay Raja, chief uk economist at Deutsche Financial institution Analysis.

Raja says:

Peak Funds uncertainty has seemingly impacted hiring plans. The jobless fee hit a brand new cyclical excessive of 5.1%. Payrolled staff (after one other upward revision to October) dropped by 38k in November (count on this to be revised greater too). The redundancy fee additionally ticked greater to 156k within the three months to October. A lot of the rise within the jobless fee, nonetheless, rests on greater participation, which elevated by 77k within the three months to October (versus the 43k improve in unemployment).
Regardless, indicators of slack are rife. The share of marginally connected employees (these exterior the labour market wanting a job) have hit a brand new cyclical excessive of 23.4% – its highest fee for the reason that onset of the pandemic (and accounts for a considerable 2.1m folks). And looking out on the breakdown of the jobless fee, it’s the youthful cohorts which have been impacted essentially the most. The 18–34-year-old unemployment fee now sits at 8.7%.

ING: Public sector employment has fallen for 3 consecutive months

ING’s UK economist James Smith has noticed that authorities hiring is now not supporting the roles market.

He writes:

Corporations – particularly in retail and hospitality – have been shedding employees this 12 months, partly due to earlier tax and minimal wage hikes. Hiring surveys stay weak.
Till lately, that was helpfully offset by resilience in authorities hiring, however that seems to be altering. Public sector employment has additionally now fallen for 3 consecutive months, judging by these payroll numbers.

{Photograph}: ING

Payrolls fall by 193,737 since Labour took energy

Pat McFadden might blame the roles knowledge on “the dimensions of the problem” Labour inherited, however in the present day’s report additionally reveals that payrolls have been shrinking for the reason that authorities took over.

In July 2024, the variety of payrolled staff peaked at 30,450,219.

The ONS estimates that in November, there have been 30,256,482 – or 193,737 fewer than when Keir Starmer and Rachel Reeves moved into Downing Avenue.

A chart displaying UK payrolls Illustration: ONS

Hannah Slaughter, senior economist on the Decision Basis, says policymakers should take motion:

“The labour market is ending the 12 months with a whimper, with falling job numbers and weakening wage progress.
“Because of this Britain is prone to usher in 2026 with rising unemployment and the danger that pay packets may begin shrinking once more. Coverage makers must react to those tendencies.
“For the Financial institution, the most recent knowledge reveals that there could also be more room to chop rates of interest past Thursday’s anticipated minimize. The Authorities too must be razor targeted on Britain’s burgeoning unemployment problem and redouble efforts to assist job creation.”

ICAEW: Funds hypothesis and slumping financial system harm jobs market

Suren Thiru, ICAEW economics director, warns that the UK jobs market faces ‘a harsh winter’, and blamed the flood of hypothesis forward of final months’s price range:

“The UK’s jobs market visibly buckled forward of the Funds because the unrelenting uncertainty from a torrent of coverage hypothesis and a slumping financial system pressured extra companies to cut back recruitment and curb wage settlements.
“Pay progress ought to proceed easing over the approaching months because the squeeze from surging staffing prices and rising unemployment additional weakens employees’ negotiating place, regardless of some upward stress from the forthcoming minimal wage hike.
“The UK labour market is dealing with a harsh winter with an ideal storm of surging enterprise prices, together with the approaching minimal wage rise, and declining buyer demand prone to elevate unemployment unnervingly greater from right here.

IoD: It is the federal government’s fault

The Institute of Administrators has laid the blame for rising unemployment firmly on the authorities’s door, calling in the present day’s labour market figures an indictment of its employment insurance policies.

Alex Corridor-Chen, principal coverage advisor for employment on the Institute of Administrators:

“At the moment’s knowledge reveals an additional softening of the labour market, with the variety of payrolled staff down 0.1% on the month and a rise within the unemployment fee to five.1%.
“These figures are an indictment of the federal government’s method to employment coverage; the mixed impact of the Employment Rights Invoice, employer’s Nationwide Insurance coverage improve, and above-inflation will increase to the Nationwide Dwelling Wage are stifling employer demand for labour.

Yesterday, a number of enterprise teams (not together with the IoD) urged Conservative friends to cease blocking Labour’s employees’ rights invoice, following a deal below which new employees would get safety towards unfair dismissal after six months, not from day one among employment as beforehand proposed.

Corridor-Chen says extra adjustments are wanted:

“Whereas the federal government’s climbdown on day one unfair dismissal rights is a welcome step, this alone is not going to flip the tide on job creation. Important motion on commerce union reforms and assured hours provisions, alongside measures to cut back the general value of employment, are wanted to encourage employers to rent workers.”

McFadden: in the present day’s figures underline the dimensions of the problem we’ve inherited

The Work and Pensions Secretary has blamed the rise in unemployment on the “scale of the problem” Labour inherited when it took energy 16 months in the past.

Pat McFadden mentioned:

“There are over 350,000 extra folks in work this 12 months and the speed of inactivity is at its joint lowest in over 5 years, however in the present day’s figures underline the dimensions of the problem we’ve inherited.
“That’s the reason we’re investing £1.5 billion to ship 50,000 apprenticeships and 350,000 new office alternatives for younger folks – giving them actual expertise and a foot within the door.
“To go additional and deal with the deep-rooted problems with our labour market, Alan Milburn can be main an investigation into the entire difficulty of younger folks inactivity and work.”

29,733 folks prone to redundancy in November

The spectre of redundancy is stalking the UK jobs market.

The ONS stories that 29,733 staff are prone to redundancy, primarily based on the HR1 companies which employers should file in the event that they’re planning to put at the very least 20 workers off.

The variety of folks made redundant in August-October rose to to five.3 per 1,000 staff, which is a rise on a quarterly foundation and in addition over the past 12 months

Inflation continues to take a big chunk out of pay progress.

Utilizing the Shopper Costs Index, annual actual common pay progress (ie, excluding bonuses) was 0.9% in August to October 2025, which is barely up on the earlier three-month interval (0.8%).

However annual actual complete pay progress (together with bonuses) fell to 1.0% in August to October 2025, which is barely down on the earlier three-month interval (1.1%). That’s the bottom studying since Might to July 2023.

UK unemployment rose by 158,000 within the August-October quarter, to a complete of 1.832m, lifting the jobless fee to five.1%.

The variety of folks in employment dipped by 16,000 within the quarter to 34.226m, which pushed the UK employment fee right down to 74.9%.

Public sector pay outstrips personal sector

At the moment’s jobs report additionally reveals the wages within the UK public sector are rising almost twice as quick as within the personal sector.

Annual common common earnings progress was 7.6% for the general public sector and three.9% for the personal sector in August to October.

That is partly due too some public sector pay rises being paid earlier in 2025 than in 2024, inflicting a base impact.

ONS director of financial statistics Liz McKeown explains:

“Wage progress slowed additional within the personal sector, whereas rising once more within the public sector, reflecting the continued affect of some pay rises being awarded sooner than they have been final 12 months.”