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The UK labour market delivered a surprise improvement this month, with unemployment falling to 4.9%, according to the latest Office for National Statistics figures released this morning.
The drop comes after months of rising joblessness and offers a short-term boost to confidence. However, the broader picture remains subdued. Vacancies fell by 3.9% in the latest quarter, continuing a downward trend, while wage growth slowed again. Regular pay rose by 3.6% annually, with total pay at 3.8%, marking the weakest growth since the end of 2020.
Taken together, the figures suggest a labour market that is stabilising on the surface, but still under pressure from economic uncertainty and rising business costs.
CIPD: ‘Reprieve’ may not last
Responding to today’s figures, James Cockett, senior labour market economist for the CIPD, said the fall in unemployment offers little relief.
“Today’s fall in unemployment marks a reprieve from the recent doom and gloom about the labour market. However, it’s likely that this will be short-lived.”
He warned that the data lags recent developments, including rising global uncertainty and increased costs for employers.
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“The latest data cover the period to the end of February, but since then global uncertainty has increased, which in a very short space of time has driven up business costs for employers in the UK. This shock is likely to lead to rising unemployment over the coming months.”
Cockett also pointed to the impact of April’s policy changes, including Employment Rights Act reforms and increases to the National Minimum Wage.
“On top of geopolitical instability, April has seen a number of the key reforms in the Employment Rights Act coming into force. These measures, alongside the increase to the National Minimum Wage, have also increased the cost of employing people.”
He added that pay growth continues to ease.
“Pay growth is continuing to fall, having reached its lowest level since the end of 2020. But employers will likely see staff bidding for higher awards as the cost of living creeps up once again.”
Georgina Huntley, People and Culture Director at ManpowerGroup, said the data reinforces a cautious, wait-and-see approach among employers.
“While there has been a shift in unemployment to 4.9% and vacancies down 3.9%, the UK labour market remains in a wait-and-see holding pattern due to the geopolitical landscape.”
She added that slowing wage growth reflects employer caution.
“Wage growth at 3.6% for regular pay and 3.8% for total pay, highlights caution from employers. On the face of it, the market looks relatively stable, yet this is driven by hesitancy, rather than increasing confidence.”
Huntley warned that beneath the headline figures lies “an ongoing sense of uncertainty and fragility”, with businesses holding back on long-term workforce planning.
Leaders urged to avoid short-term cuts
Jeanette Wheeler, Chief People Officer at MHR, said the figures reflect a familiar mix of uncertainty and caution, warning against reactive cost-cutting.
“These latest employment figures reflect that strain - with the employment rate dipping, vacancies falling to their lowest level since early 2021, and wage growth slowing. Unemployment sits at 4.9% - down slightly in the quarter, but still above where it was a year ago. The direction of travel is one businesses can’t afford to ignore.
“When the economic weather turns, it can be tempting to cut costs, freeze hiring and defer investment in people. It’s an understandable instinct, but it’s a short-term response to a longer problem and can do lasting damage to an organisation’s capability and culture.”
Wheeler added: "The businesses that will emerge strongest from this period are those that resist that pull. Skills development doesn't stop being important because the economy is struggling – if anything, it becomes more important. Equipping your workforce to adapt, to grow, and to carry the organisation through uncertainty is one of the most valuable investments a business can make right now.
"Leaders who keep their focus on workforce development, on retaining talent, and on creating an environment where employees feel valued and supported – those are the leaders who will be in the strongest position when conditions improve.”
Uneven hiring and shifting job opportunities
Kevin Fitzgerald, UK Managing Director at Employment Hero, said the figures point to a labour market that remains active but increasingly uneven.
“Today’s ONS figures point to a labour market that is still active, but increasingly uneven beneath the headline numbers.”
He highlighted diverging trends between full-time and part-time work.
“Full-time employment rose 1.1% month-on-month in March, while part-time roles fell by -0.5% for the third month in a row… This points to a labour market that is becoming more selective about the kinds of roles being created.”
Fitzgerald added that SMEs are still hiring, but under pressure.
“The resilience is there, but so is the strain.”
Youth and vulnerable workers still at risk
Despite the fall in overall unemployment, concerns remain for younger and more vulnerable workers.
Lauren Thomas, economist at Deel, warned that recent trends have disproportionately affected those at the edges of the labour market.
“Unemployment has been rising steadily, particularly among the youngest and oldest workers, the very groups already most vulnerable in a weakening market. Stronger rights mean little if the jobs are not there to begin with.”
She added that upcoming reforms and global pressures risk further dampening hiring appetite.
“Introducing these reforms alongside rising employer taxes and mounting economic headwinds risks an unintended consequence: businesses becoming more cautious about hiring, not less.”
However, she pointed to continued global demand for UK talent as a potential bright spot.
“The UK talent pool is deep and internationally recognised. The priority now must be ensuring domestic employers tap into it, because technical talent will be a critical lever for capitalising on the AI opportunity, and the UK cannot afford to leave it on the table.”
