The UK’s unemployment rate has climbed to 5.1% in the three months leading up to October 2025, the highest level since early 2021. This is a slight increase from 5.0% in the previous quarter, with total unemployment rising by 158,000 to 1.832 million.
Employment also fell by 16,000, dropping to 34.226 million, largely due to a decrease in full-time positions. Wage growth has begun to slow, with average earnings, excluding bonuses, growing by 4.6% a decrease from 4.7%. When adjusted for inflation, real wage growth is merely 0.5%, highlighting that earnings struggle to keep pace with rising living costs.
Youth unemployment has been particularly alarming, with 702,000 individuals aged 16 to 24 unemployed between July and September 2025. This underscores an increase of 60,000 year-over-year, bringing the youth unemployment rate to 15.3%.
These labor market challenges have led to increased expectations that the Bank of England may consider interest rate cuts to spur economic growth. Financial markets are nearly fully anticipating a quarter-point cut at the next meeting, with investors eyeing indications about future monetary policy into 2026.
Additionally, the Confederation of British Industry (CBI) has raised its 2026 growth forecast from 1.0% to 1.3%, citing a temporary uplift from government spending following recent tax increases.
However, the CBI warns that underlying economic structural issues remain unaddressed, with a budget prioritizing stability over long-term investments. Overall, the UK’s labor market exhibits significant strain, characterized by rising unemployment and stagnant wage growth, pointing to the necessity for policy interventions to promote economic recovery and employment stability.
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