Labour Market Outlook | Hiring squeeze deepens as vacancies & wages drop again

The UK labour market continued its downward trend in July, with new data showing a sustained slowdown in hiring and a sharp fall in payroll figures.

According to the latest release from the Office for National Statistics (ONS), the number of payrolled employees fell by 25,000 between April and May 2025, with a provisional 41,000 drop recorded in June. Over the past 12 months, payrolled employment is down 135,000, marking a clear shift in employer behaviour amid ongoing economic uncertainty.

The unemployment rate rose to 4.7% in the three months to May, up from 4.6% in the previous quarter, while the employment rate climbed to 75.2%, suggesting more people are moving into the labour market but struggling to find jobs. Economic inactivity declined slightly to 21.0%, and vacancies fell by 56,000 to 727,000, the lowest level outside of the pandemic since 2015 and the 36th consecutive period of decline.

Real pay growth also slowed. While regular pay (excluding bonuses) rose 5.0% year-on-year, real wage growth adjusted for CPIH inflation stood at just 1.1%, pointing to continued pressure on take-home earnings.