ONS Labour Market Data March 2026: Pay Growth Hits Five-Year Low

Unemployment holds at 5.2%. Regular pay growth hits a five-year low. Vacancies slip further below pre-pandemic levels. And in April, it gets more expensive to hire.

The latest ONS Labour Market data released today (19th March 2026) covers November 2025 to January 2026. The headline? Not much has changed. And that’s the problem.

The UK labour market isn’t crashing. It’s stalling. Payrolled employment is broadly flat. Vacancies are drifting downwards. Regular pay growth has fallen to 3.8%, its lowest level in over five years. And the employers most likely to offer apprenticeships, entry-level jobs, and flexible roles for career changers? They’re the ones pulling back hardest.

For anyone working across Further Education and skills, colleges, training providers, apprenticeships and employers, this data raises an uncomfortable question. What happens to the education-to-employment pipeline when the employment end stops pulling people through?

A flat market that’s getting more expensive

The unemployment rate held at 5.2%, unchanged from the previous release but still up on both the quarter and the year. The employment rate edged up slightly to 75.1%. Economic inactivity fell to 20.7%. On paper, not much to panic about.

But dig into the detail and the cracks are there. Payrolled employees fell by 96,000 on the year. The flash estimate for February puts the total at 30.3 million, down 49,000 on the year, with only a marginal monthly increase of 20,000. Vacancies dropped to 721,000, now firmly below pre-pandemic levels and continuing a steady decline from the peak of over one million in early 2022.

Critically, vacancy declines are concentrated among smaller firms, offset by rises among larger ones. Smaller employers are exactly where apprenticeships and entry-level opportunities tend to sit.

Pay growth is slowing, and April is coming

Regular pay growth dropped to 3.8%, with private sector growth at just 3.3%. In real terms, adjusted for CPI, pay is growing by just 0.5%. That’s thin.

And it’s about to get squeezed further. April brings the employer NICs increase and the next National Minimum Wage rise, including an 8.5% jump for 18-20 year olds as the government pushes towards equalising the rate with over-21s. For employers weighing up whether to take on an apprentice or create an entry-level post, the maths is getting harder.

Total workforce jobs fell by 266,000 on the year. Self-employment jobs dropped by 242,000, a 5.6% fall, which is striking given the policy interest in self-employment as a route out of economic inactivity.

The entry-level squeeze

The combination of rising employer costs, tighter employment regulation, and a softening labour market creates a specific problem for the FE sector. The education-to-employment pipeline depends on employers creating openings at the other end. When confidence falls and costs rise, apprenticeships, traineeships, and junior roles are the first to be paused or cut.

A flat labour market doesn’t just mean fewer jobs, it means fewer of the right kinds of jobs for the people the sector is training. The Employment Rights Act adds further pressure. Higher costs and tighter regulation risk shrinking the pool of flexible and entry-level roles that younger workers and career changers depend on. With energy prices rising and the prospect of interest rate relief fading, employer recruitment hesitancy looks set to deepen, not ease.

The youth picture

The number of young people not in education, employment or training (NEET) stands at 957,000 as of October to December 2025, up from around 800,000 pre-pandemic. The government has responded by expanding the Jobs Guarantee scheme to all under-25s, adding over 35,000 subsidised posts, and introducing a £2,000 bonus for SMEs hiring young apprentices. Foundation apprenticeships are being extended into hospitality and retail from April 2026, and a new Level 4 AI and Automation apprenticeship is also launching.

Whether these interventions can cut through in a market where employers are increasingly cautious about taking on new workers remains the open question.

What to watch

April will be the real test. Employer costs increase in a labour market that is flat at best. If smaller employers, the backbone of apprenticeship delivery and entry-level hiring, respond by freezing recruitment, the effects will show up not just in the next ONS release but in college placement rates, apprenticeship starts, and the NEET figures later in the year.

The Claimant Count sits at 1.692 million. There were 31,000 working days lost to labour disputes in January, down sharply from 118,000 in December.

The next ONS Labour Market release is on 21st April 2026.

Sector Reaction

Liz McKeown, Director of Economic Statistics, ONS said:

“Labour market conditions were little changed at the start of the year. The number of workers on payroll rose slightly in the latest month but, overall, the recent picture has been broadly flat. Unemployment remains at the rate reported last month, up on the quarter and the year, while the number of vacancies remains largely stable, with declines among smaller firms being offset by rises among larger ones. Regular wage growth is at its lowest rate in more than five years, with pay growth in both the private and public sectors continuing to ease.”

Stephen Evans, chief executive at Learning and Work Institute (L&W), said:

“Worryingly, the number of young people not in employment or full-time education remains stubbornly stuck at 1.25 million. Recent announcements including hiring incentives for employers will help, but mostly miss the three in four NEETs not on unemployment-related benefits. Overall the labour market remains pretty flat, with little change in the main measures of employment and vacancies and earnings growth continuing to ease. That leaves the Government needing another two million people in work to hit its 80% employment rate ambition. With economic risks ahead there’s much more to do.”

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

“Today’s figures indicate the UK labour market continues to face a wide range of significant challenges, even before the effects of increased global instability and rising oil prices are captured in the official statistics.

“Growth in nominal wages has fallen sharply just as inflationary pressures look set to increase once more.

“Average nominal wage growth has slowed to 3.8%, and is at its lowest since November 2020, ending a 48 month run of above 4% wage growth. Private sector wage growth is now at 3.3%, meaning many workers will be seeing little to no real improvement in their living standards as inflation remains above target at 3.0%.

“More broadly, renewed global volatility risks derailing Government ambitions to ease living costs in 2026 and could also mean Bank of England policymakers decide against a further cut to interest rates later today.

“The Government must therefore remain on high alert and ready to provide additional support should conditions deteriorate further. Rising prices will disproportionately affect low-paid and insecure workers, many of whom are still grappling with the legacy of the cost-of-living crisis earlier in the decade.

“Unemployment remains at 5.2%, its highest level since late 2020, just below the peak forecasts of both the OBR and Bank of England for 2026. Meanwhile, economic inactivity has fallen to 20.7%, the lowest in nearly six years. Although this is positive to see, the combination of falling inactivity and stubbornly elevated unemployment suggests many are struggling to find work.

“Young people are being hit particularly hard. Around one in seven 18–24 year olds are now unemployed, with the rate at 14.5% representing a ten-year high. There are also 230,000 young people who have been out of work for six months or more, who could be eligible for the Government’s new Youth Jobs Grant. But to succeed, the scheme must deliver secure, sustainable jobs – otherwise it risks worsening physical and mental health and doing little to lift young people out of long-term reliance on the welfare system.”

Neil Carberry, Chief Executive at the Recruitment and Employment Confederation (REC) said:

“This data confirms what business surveys were telling us during the winter – after a long period in the doldrums, the labour market showed signs of life at the start of the year. A rise in employment and long-awaited progress on inactivity demonstrated real resilience in our labour market, and opportunities for workers.

“But let’s be clear, this performance felt like swimming upstream to employers. The rising cost of employment slowed the rate of recovery and it faces further pressure as the Gulf crisis increases uncertainty again. The picture for the rest of the year is now unclear. Unemployment is likely to rise further over time, and inflation rebound. With all of that in mind, the Government can no longer delay action that addresses the cost of employment crisis.

“Positive steps on reducing employment costs are needed to address the cost-of-living challenge. Firms can raise prices less and raise wages more where less of their margin is eaten by non-wage payroll costs and red tape. That means a much more practical approach to the role of government in the jobs market, and a focus on enabling businesses to do more. Government should start with a practical redesign of plans for rights to guaranteed hours for workers, which have departed so far from the original Low Pay Commission suggestion as to be unrecognisable. Without change, they promise to hole flexibility in our jobs market below the waterline, causing catastrophic damage to chances for young people in particular.”

The Welsh Government said:

“Evidence from a range of sources suggest the labour market in Wales has followed similar trends to the UK since the pandemic. Latest figures from the Annual Population Survey (APS) show the unemployment rate for people aged 16 and over in Wales was 4.5% compared to the UK rate of 4.2%. It also shows Wales’ employment rate is relatively close to the all-time high.

“We have rolled our sleeves up to deliver for businesses, communities, and thousands of workers across Wales as we build a stronger, fairer, and greener economy – supporting more than 50,000 jobs this Senedd term through business programmes.

“As we’ve said before, we’re quoting the Annual Population Survey because of concerns about the reliability of Labour Force Survey data. In fact, the Office for National Statistics (ONS) itself advises caution when taking these statistics as the only measure of the labour market in Wales. For greater accuracy it is recommended that a range of sources are used, while the ONS develops a new survey.”

Jack Kennedy, Senior Economist, Indeed said:

“While today’s data – which predates the outbreak of conflict in Iran – suggests a temporary stabilisation, with unemployment holding steady and payrolled employment flat, the underlying trend remains one of softening. With the situation in Iran now darkening the global outlook, any sense of relief is likely to be short-lived.

“Spiking energy prices are adding to cost pressures while dashing hopes of near-term monetary policy relief, which is likely to translate into even greater recruitment hesitancy. Slowing wage growth and rising inflation pressures mean that real growth in workers’ pay packets — one of the few genuine bright spots recently — is now under direct threat.

“The Employment Rights Act risks reinforcing these headwinds. Higher employment costs and tighter regulation could lead employers to scale back flexible and entry-level roles — precisely the roles many younger workers depend on.

“The Chancellor also announced bold ambitions for AI adoption this week in an effort to boost growth, but there remains much ground to cover to see wide-ranging benefits within the workforce. Our research indicates only 41% of UK workers currently use AI at work, and more than a quarter feel actively disengaged from it.”

Jeanette Wheeler, Chief People Officer at MHR said:

“The world is in the midst of another crisis, and our interconnected world means that no matter how far away we might feel from the situation, we’re closer than we think. Bank policymakers who were previously set to cut interest rates are now facing events out of their control, and that will have a very real impact on how businesses continue to operate in the UK.

“Hiring across the UK is already down as the latest ONS figures reveal the estimated number of vacancies dropped in the latest quarter. Average earnings have fallen to 3.8% from 4.2%, which is the slowest rate of wage growth in more than five years, and the unemployment rate remains largely unchanged.

“With so much out of their control, business leaders need to focus on what they can control and keep a keen eye on how they’re balancing their long-term mission and vision for their organisation against immediate pressures. This has, and always will, come down to retaining a central focus on the workforce.

“Now is not the time to deprioritise your people. For some it may feel like the easy option, especially given recent stories about staff being let go as companies focus on how AI can create efficiencies. But your people are your lifeblood. They prompt the business into doing better – they keep it moving, they keep it thinking, and they challenge themselves and their teams in ways that technology cannot.

“As the world continues to remain in a constant state of flux, business leaders can’t wait for order to be restored. It’s time for them to create their own path, empowering their employees to help lead the way.”

Arushi Bhasin, Senior Economist at Youth Futures Foundation, comments:

“The Office for National Statistics’ latest labour market data has been released today, showing that unemployment continues to increase at a rapid pace. Around 1 in 7 (14.5%) young people not in full-time education are now unemployed – up from 1 in 10 (10.1%) three years ago, after the UK emerged from the pandemic. That means an estimated 482,000 16–24-year-olds not in full-time education are out of work and actively looking for a job, an increase of around 160,000 young people since 2023. Over the past year, unemployment among young people has risen, while economic inactivity — those not in work and not actively looking — has fallen.

“These figures underline how stubborn the youth unemployment and inactivity challenge remains, and why this week’s additional investment in the Youth Guarantee and apprenticeship reform is so important. The strengthening of the Youth Guarantee, which we have called for along with Youth Employment Group co-chairs, will help open clearer pathways into training and work for young people, including by broadening the age eligibility of the Jobs Guarantee up to 24, to help those who have been unemployed long term.

“Apprenticeships will also be an important part of the solution. International evidence shows they can be particularly impactful in supporting marginalised young people into training and employment, especially at entry level, yet these opportunities have declined significantly in recent years. Efforts to rebalance the system, including through employer incentives to take on more young apprentices, are therefore positive developments.

“But the scale of the challenge means building on this promising foundation over the coming years will be essential. As our Youth Employment 2025 Outlook reveals, the potential gains for our young people and the economy are enormous. If the UK matched the Netherlands’ youth participation rate, approximately 567,000 more young people would be in work or education, boosting the long-term economy by as much as £86 billion.”

Lee Biggins, CEO and Founder of CV-Library, said:

“We have seen some cautious signs of a hiring recovery at the start of this year, with businesses beginning to hire again and vacancy levels increasing compared to last year. Some sectors like engineering and construction, in particular are showing encouraging signs.

“Things can quickly change though. Economic uncertainty often leads businesses to pause hiring or look to cut costs – particularly if energy, transport and raw material costs rise steeply, as we’re already seeing amid ongoing global tensions.

“Whether these early positives turn into sustained recovery will depend on how wider economic pressures evolve over the coming months.

“However, there are worrying underlying employment trends in the younger generations. Youth unemployment is high and Millennials in their prime career years are among those most affected when payrolled employees are reduced.”