ONS Labour Market: UK Unemployment Hits 4-Year High of 4.7%, But Economic Inactivity Falls

The Latest Office for National Statistics data has been released today (17th July 2025). This is looking at the employment data from March to May 2025.

The Top level figures are that the Employment rate for people aged 16 to 64 for (Mar – May 2025) is 75.2%, an increase of 0.8% percentage points (pps) on the previous year, this is a quarterly change of 0.2pps, but since Since Dec-Feb 2020 it is down -1.2pps.

The Unemployment Rate Is Up On The Quarter And The Year, And Is Above Pre-pandemic Rates:

The Unemployment rate Aged 16+ for March – May 2025 is 4.7%, up slightly to 0.2 percentage points on the previous year. Quarterly change of an increase of 0.2pps, but since Dec-Feb 2020 this is an increase of 0.7pps.

ONS estimates the UK population is around 68,265,200 from a Mid-year estimate (2023).

The Economic Inactivity Rate Is Down On The Quarter and Down On The Year, But Is Still Above Pre-pandemic Rates:

The Economic inactivity rate (all aged 16 to 64) has fallen to 21% and has had a quarterly change of -0.4pps, but since Dec-Feb 2020 it is still 0.7pps above Pre-pandemic rates. In terms of people, this is a reduction of 375,000 people who are on not ‘economically inactive’ compared to last year. However, ONS has flagged, that due to increased volatility of LFS estimates, resulting from smaller achieved sample sizes, estimates of change should be treated with additional caution.

The Number Of Vacancies Are Down On The Quarter And Are Below Pre-pandemic Levels

Significant Drop in the Number of Job Vacancies. According to the Vacancy Survey from the Office for National Statistics, the number of vacancies are down on the quarter and are below pre-pandemic levels. The Quarterly change is -56,000 and Since Jan-Mar 2020 (during the Covid pandemic) -68,000 vacancies.

Ben Harrison, Director of the Work Foundation at Lancaster University has calculated:

“Unemployment is now at its highest level for four years at 4.7%, while the number of vacancies has fallen by 56,000 on the quarter to 727,000 in April to June 2025. There are now 2.3 people seeking work per vacancy available in the most challenging labour market in recent year”

Latest ONS Labour Market Data

Estimates for payrolled employees in the UK fell by 135,000 (0.4%) between May 2024 and May 2025, and by 25,000 (0.1%) between April and May 2025.

When looking at March to May 2025, the period comparable with ONS’ Labour Force Survey (LFS) estimates, payrolled employees fell by 81,000 (0.3%) over the year, and by 68,000 (0.2%) over the quarter.

The early estimate of payrolled employees for June 2025 decreased by 178,000 (0.6%) on the year, and by 41,000 (0.1%) on the month, to 30.3 million. The June 2025 estimate should be treated as a provisional estimate and is likely to be revised when more data are received next month.

LFS estimates from January to March 2025 include the full effect of recent improvements in LFS data collection and sampling methods introduced from January 2024 by ONS, and are therefore more likely to be representative of labour market conditions. An increased amount of volatility will remain in the LFS estimates from mid-2023 and throughout 2024, so ONS advise caution when interpreting change involving those periods. ONS are recommening using LFS estimates as part of their suite of labour market indicators, alongside workforce jobs, Claimant Count and Pay As You Earn (PAYE) Real Time Information (RTI) estimates.

ONS Mar – May 25 Figures:

The UK employment rate for people aged 16 to 64 years was estimated at 75.2% in March to May 2025. This is above estimates of a year ago, and up in the latest quarter.

The UK unemployment rate for people aged 16 years and over was estimated at 4.7% in March to May 2025. This is above estimates of a year ago, and up in the latest quarter.

The UK economic inactivity rate for people aged 16 to 64 years was estimated at 21.0% in March to May 2025. This is below estimates of a year ago, and down in the latest quarter.

The UK Claimant Count for June 2025 increased on the month and the year, to 1.743 million.

The estimated number of vacancies in the UK fell by 56,000 on the quarter, to 727,000, in April to June 2025. This is the 36th consecutive period where vacancy numbers have dropped compared with the previous three months, with vacancies decreasing in 14 of the 18 industry sectors. Feedback from our Vacancy Survey suggests some firms may not be recruiting new workers, or replacing workers who have left.

5% Wage Growth, Yet Real Pay Up Just £26 Per Week Since 2008

In March to May 2025, annual growth in employees’ average earnings in Great Britain for both regular earnings (excluding bonuses) and total earnings (including bonuses) was 5.0%. Annual average regular earnings growth was 5.5% for the public sector and 4.9% for the private sector. Ben Harrison, Director of the Work Foundation unpacks the data into real life on wage growth explaining: “Data shows nominal wage growth slowing to 5%, and despite the longest period of sustained wage increases in over 20 years, workers continue to feel the impact of nearly two decades of stagnating pay packets. Wages are just £26 a week higher in real terms than they were at the start of the global financial crisis in August 2008”.

There were an estimated 37,000 working days lost because of labour disputes across the UK in May 2025.

Sector Reaction

Ben Harrison, Director of the Work Foundation at Lancaster University, a leading think tank for improving working lives in the UK:

“Today’s figures suggest the UK’s labour market is in a challenging transition. Data shows more employers are holding back from hiring, the pace of pay growth is easing but the number of people beginning to look for work is on the rise.

“Unemployment is now at its highest level for four years at 4.7%, while the number of vacancies has fallen by 56,000 on the quarter to 727,000 in April to June 2025. There are now 2.3 people seeking work per vacancy available in the most challenging labour market in recent years.

“Although these figures may reflect a reduction in business confidence to recruit as employment costs rise, it also appears more people are moving out of economic inactivity to begin looking for work. Economic inactivity has fallen to 21%, the lowest percentage since the onset of the pandemic in early 2020, and down 375,000 people on the year.

“As more people are now looking for a job, there is a significant risk they will struggle to access secure and well-paid work. Data shows nominal wage growth slowing to 5%, and despite the longest period of sustained wage increases in over 20 years, workers continue to feel the impact of nearly two decades of stagnating pay packets. Wages are just £26 a week higher in real terms than they were at the start of the global financial crisis in August 2008. Years of stagnating wages and the cost of living crisis mean that six in ten workers (60%) say they have very little or nothing left over from their pay at the end of the month.

“Today’s data underscores the importance of Government committing the investment and funding required to support more people into secure and well paid work. It’s vital that alongside an extra £1 billion for additional employment support programmes, the Government sticks to its guns on the Employment Rights Bill and puts the creation of high quality jobs at the heart of its Industrial Strategy.”

Responding to the latest ONS figures, Stephen Evans, chief executive of Learning and Work Institute (L&W), said:

“The labour market looks to be continuing to ease with vacancies falling again and below pre-pandemic levels and payroll employment down too. Sectors like retail and hospitality seem harder hit than others, seeing the largest falls in employment of 174,000 combined, but also the highest pay growth as minimum wage rises kick in. But the data remain uncertain: for example, last month’s 109,000 fall in payroll employment has been revised to a 25,000 fall. Achieving the Government’s 80% employment rate target will require a growing economy and a plan to help two million more people in work.”

The Recruitment and Employment Confederation (REC) Chief Executive Neil Carberry said:

“While the overall levels of employment and unemployment remain reasonably steady, the trend is one of clear weakening across most measures. This reflects businesses’ reactions to rising costs and an uncertain external environment. Many firms are choosing to operate leaner in response to the current situation – we can see that in private sector temporary work outperforming other forms of hiring right now as firms seek flexibility.

“We should not let pessimism take hold, our data shows businesses are confident in their own plans, while households have rebuilt their cash position after the past few years. If Government can increase businesses’ and families’ willingness to spend for the future, we would likely see a positive trend in both the labour market and the wider economy. A reduction in the interest rate next month will help with that but so will reassuring firms that they don’t face another swingeing tax raid in the Budget, and fixing the impracticalities in the Employment Rights Bill, a piece of legislation that is not yet suited to the modern workplace.

“More people rejoining the workforce will help address labour and skills shortages. The focus should move to ensure businesses have the flexibility and support to tap into a growing talent pool and keep it sustainable.”

Jack Kennedy, Senior Economist from Indeed:

“The latest figures ease immediate pressure on the Bank of England to accelerate interest rate cuts. Though the labour market continues to soften, the hefty revision to May’s payrolled employees figure paints a less alarming picture than previously. 

“With wage growth also coming in slightly stronger than expected, the labour market data is likely to be interpreted by the Monetary Policy Committee as supportive of maintaining a gradual pace of rate cuts amid inflation persistence. 

“While an August rate reduction remains widely anticipated, questions remain on what happens thereafter. Though the prospect of stagflation is making life uncomfortable for the Bank, the labour market appears to be gradually cooling rather than tanking”

Abigail Coxon, Senior Economist at Youth Futures Foundation, comments:

“Today’s labour market data from the ONS reveals that around 1 in 5 young people not in full-time education are economically inactive. An estimated 820,000 16-24-year-olds not in full-time education are neither in work nor actively seeking it; equivalent to an alarmingly high rate of 20.1%. This marks a sharp rise since 2021 as the UK emerged from the pandemic, when the rate stood at 15.7%, meaning around 250,000 more young people are now inactive. 

“Unlike after the 2008 financial crisis – when the majority of young people not in education or work were actively looking for jobs – the recent rise in NEET levels since 2021 is driven in part by growing rates of economic inactivity. Over the past three years, long-term sickness has been the primary driver of the increase in youth economic inactivity, with mental health conditions the most common cause related to ill health. 

“This week we launched our latest research report to understand the root causes of young people’s worsening mental health in England. This first-of-its-kind research, carried out by the University of Manchester and University College London, evaluates multiple potential drivers of worsening youth mental health, assessing the strength of evidence supporting each one and highlighting where important gaps remain. 

“We know that being out of work and education can have a scarring effect on young people even decades later, impacting their future prospects and wellbeing. The research further reinforces the need for mental health to be prioritised and for preventative solutions that bring together health services, education, employers, civil society and other stakeholders.”