Unemployment rises in October–December 2025 quarter while real wage growth remains subdued; payroll employment continues to edge lower, ONS data show.
The UK unemployment rate rose to 5.2 per cent in the October to December 2025 quarter, climbing to its highest level in nearly five years, as signs of a cooling labour market continued to emerge, according to the latest labour market bulletin released by the Office for National Statistics (ONS).
The number of unemployed people aged 16 and over stood at 1.883 million during the quarter, an increase both compared with the previous three-month period and a year earlier.
“The UK unemployment rate for people aged 16 years and over was estimated at 5.2 per cent in October to December 2025. This is up in the latest quarter and above estimates of a year ago,” the ONS said.
At the same time, the employment rate for those aged 16 to 64 was estimated at 75.0 per cent. While this marked a slight decline on the previous quarter, it remained unchanged compared with a year earlier.
The economic inactivity rate fell to 20.8 per cent, down both on the quarter and the year, suggesting that more people are either in work or actively seeking employment
Payroll data pointed to continued weakness in job creation. The early estimate of payrolled employees for January 2026 fell by 134,000 on the year to 30.3 million, and was down by 11,000 on the month.
The ONS cautioned that the January figure is provisional and “likely to be revised when more data are received next month. ” On pay, annual growth in average total earnings (including bonuses) and regular earnings (excluding bonuses) was 4.2 per cent in October to December 2025.
However, once adjusted for inflation using the Consumer Prices Index including owner occupiers’ housing costs (CPIH), real wage growth stood at just 0.5 per cent.
The public and private sectors showed divergence in wage growth trends. Annual regular earnings growth was 7.2 per cent in the public sector compared with 3.4 per cent in the private sector, though the ONS noted that the public sector rate reflects base effects from pay awards being paid earlier in 2025 than in 2024.
Meanwhile, vacancies remained broadly flat. Early estimates for November 2025 to January 2026 suggested a small increase of 2,000 to 726,000 compared with the previous three-month period.
The ONS also highlighted ongoing improvements in Labour Force Survey (LFS) data collection and sampling methods, noting that recent estimates may reflect both underlying economic developments and enhancements to survey quality. It advised “additional caution when interpreting survey change measures.”
Overall, the latest data suggest that while economic inactivity is edging lower and vacancies are stable, the rise in unemployment and slowing wage momentum signal a softening labour market as the UK economy navigates a period of weaker growth and tighter financial conditions.
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