labour market statistics released by ONS in May 2025 prompted reaction from REC; REC's take on the figures revealed
The UK jobs market is currently experiencing a period of cautious growth, with continued decline in vacancies, moderate employment growth, slower wage increases, and rising employment costs. This state of affairs has led to a more cautious approach to hiring among employers.
According to the latest data, vacancies have fallen for the 37th consecutive quarter, with around 718,000 vacancies estimated in mid-2025. This decline has been observed across most sectors, with the retail sector, secretarial/clerical, and hotel/catering sectors reporting the steepest drops in permanent vacancies.
Employment levels show a slight improvement, with the employment rate for working-age adults at around 75.3% (April-June 2025), marginally up on the previous year. Unemployment sits at about 4.7%, slightly higher than a year ago but stable in recent months. Economic inactivity has declined modestly, with around 2 million economically inactive people wanting a job, indicating some potential labor market slack despite falling vacancies.
Average annual earnings growth for regular pay stands at about 5.0%, with public sector wages growing faster than private sector wages. However, recruitment activity is cautious due to rising business costs, inflation, and geopolitical risks, which depress employers' eagerness to expand payrolls rapidly.
Productivity, a key factor in driving economic growth, is indirectly impacted by these dynamics. Employers are hesitant to hire extensively, sometimes avoiding replacing staff, which could signal stagnant or uneven productivity growth. Increased automation and technology efficiencies are noted as potential mitigating factors, but uncertainty makes firms cautious about investment.
The Employment Rights Bill, currently undergoing the remaining stages in Parliament, is influencing employer considerations related to costs and rights. While no detailed updates are provided, stakeholders express concern over new policies potentially increasing employer costs. There is a call for government measures to mitigate financial pressures on businesses, such as making Employee Assistance Programs tax-free and investing Immigration Skills Charge revenues into training and skills initiatives.
The Minister has emphasized the need for increased worker availability and business investment to reach the goal of 80% employment. To address employers' concerns and boost hiring, the Bill requires amendments. The amendments to the Bill are aimed at addressing employers' fears and could potentially lead to increased hiring.
In conclusion, the future outlook for the UK jobs market in 2025 remains cautious. Employers are managing costs amid economic uncertainty, slowing hiring, and continued declines in vacancies, while employment rates and wages show modest gains. The government’s approach to employment legislation and fiscal policy will be pivotal in influencing business investment and workforce dynamics for the remainder of the year.
The decline in vacancies, observed across various sectors, suggests that the UK's business sector is facing economic challenges, potentially influenced by politics and general news. With rising costs, inflation, and geopolitical risks, the finance department of many companies might be taking a more cautious approach to their hiring strategies.
The Employment Rights Bill, currently undergoing parliamentary review, could potentially impact the costs and rights of employers, making it a topic of concern for businesses seeking to minimize financial pressures. The government's approach to employment legislation and fiscal policy will play a crucial role in shaping the UK's job market for the rest of the year.
