What’s happening with UK wages and employment?

New data from the Office for National Statistics (ONS) show a rise in the UK’s unemployment rate after a period of stability. From January to March 2025, the rate increased to 4.5%, following four consecutive periods at 4.4%.

Nominal wages have continued to grow at 6%, with real wages rising more modestly, at 2%. But in recent months, there has been a downward trend in the annual growth of average weekly earnings, both in nominal and real terms.

Vacancies fell by 3% compared with the previous month and by 15% year-on-year, with annual declines recorded in 18 out of 19 sectors. Redundancies decreased for the second consecutive month.

Employment

The number of people in employment in the UK has increased, with 34 million individuals aged 16 and over employed from January to March. But this figure is 20,000 lower than the previous month – marking the first monthly decline that we have seen since February 2024, more than a year ago (though it remains 640,000 higher than the same period last year). At 75%, the employment rate for 16-64-year-olds remains stable.

Unemployment rates are highest among younger age groups. More than a quarter of 16-17-year-olds not in full-time education are currently unemployed – above pre-pandemic levels (23% at end of 2019).

The unemployment rate for 18-20-year-olds is also up, having reached 12.8% (note that it has been rising steadily since mid-2022 – see Figure 1). This group is particularly interesting as the April increase in the national minimum wage was relatively higher than in other groups. While the minimum wage increase was 7% for those aged 21 and over, the increase for 18-20-year-olds was 16.3%, reaching £10 per hour. 

In terms of payroll employees, provisional estimates for April 2025 indicate that the number stood at 30.3 million – a decrease of 105,000 employees over the past year. Compared with the previous month, payrolled employees fell by 0.1% (32,500 fewer people) in April.

Figure 1: Unemployment rate by age

Source: Author’s calculations using ONS labour market data.

Wages

In terms of wages, average weekly earnings (AWE) – including total and excluding regular bonuses – continue to rise. Total median weekly pay reached £722, while regular pay stood at £671.

But in recent months, we have observed a downward trend in the annual growth of average weekly earnings, both in nominal and real terms (see Figure 2). Annual average nominal wages increased by 5.5% for total pay and 5.6% for regular pay. Real wage growth has only managed to outpace inflation since mid-2023, a trend that continues, with the latest data showing a real wage increase of 1.7% for total earnings and 1.8% for regular earnings.

Figure 2: Annual growth rate average weekly earnings, total and regular pay (nominal versus real)

Source: Author’s calculations using ONS labour market data.

As increases in both employer national insurance contributions (NICs) and the minimum wage came into effect at the start of April, overall vacancies declined to 761,000 over the period from February to April 2025. This is a 15% drop compared with the same period last year, and a 3% decrease compared with the previous month (see Figure 3).

The sustained decline in total vacancies has brought the number of new job openings well below pre-pandemic levels (the figure was 819,000 in the period from November 2019 to January 2020). Compared with November 2024 to January 2025 (quarterly change), vacancies fell in 14 of the 19 ONS industry groups. On an annual basis, 18 out of 19 sectors experienced a reduction in new hires (see Figure 4).

Figure 3: Total vacancies

Source: Author’s calculations using ONS labour market data.

Figure 4: Annual change and quarterly change (%) in vacancies, by sector

Source: Author’s calculations using ONS labour market data.

Redundancy trends have fluctuated, but overall they show an upward trajectory since mid-2022 (see Figure 5). In April 2022, redundancies stood at around 51,000, rising to 110,000 by March 2025. But in the short term, redundancies fell for the second time after a period of five consecutive months of increases.

Between January and March 2025, a total of 110,000 people were made redundant – a decrease of 7,000 compared with the previous month but an increase of 21,000 when compared with the same period last year. (Note that the redundancy level is the number of people who were made redundant in the three months prior to interview; the figure is not seasonally adjusted.)

Figure 5: Redundancies levels, 2019-25

Source: Author’s calculations using ONS labour market data.

The UK labour market continues to perform relatively well in comparison with the rest of the G7 (see Table 1). In terms of the employment rate, at 75%, the UK is in the top three, behind only Japan and Germany. And with an unemployment rate of 4.5%, the UK ranks fourth, behind Japan, Germany and the United States, but ahead of France, Italy and Canada. 

Table 1: International comparisons

Source: Author’s calculations using ONS labour market data.
Note: Lower age limit for the UK and United States is 16 rather than 15. 

The latest figures reinforce trends observed in recent months: businesses appear to have anticipated rising labour costs linked to the policy changes outlined in the last autumn’s budget. But this month’s data reflect the first clear signs of the impact of the increase in employer NICs and the national minimum wage. Indeed, in April 2025, vacancies fell to 761,000 – the largest monthly drop in the past year – while the number of payrolled employees also declined at a faster rate. 

For unemployment and wages, we will have to wait to see the initial impact of these policies in the data. Next month’s labour market data release will show the wider effects of these measures. The scheduled rises in minimum wage and public sector pay are likely to push up pay packets across the economy, particularly in lower-paid sectors. 

This could have a further influence on hiring patterns for younger workers. Those aged 18-20 have experienced the largest percentage increase in the minimum wage compared with other age groups. While they are not directly affected by the rise in employer NICs, they are more likely to work in industries facing the highest increases in employer costs. In combination, these policies could have a substantial effect on this age group – one that already faces higher levels of unemployment. 

Author’s note: The increase in NICs and the national minimum wage, which came into effect on 6 April 2025, are now partially reflected in the data presented in the latest ONS release. Vacancy figures and payroll data (including employee numbers and pay) are available up until April, capturing the initial impact of the policy changes. But data on unemployment, wages and redundancies are only available up to March 2025. We will need to wait until next month to observe April trends in these areas. 

Author: Camila Arroyo From

Photo: Alex Segre for iStock

To learn more about the dynamics of the labour market, explore other recent articles from the Economics Observatory:

• What do we know about labour market power in the UK
• Good work what do we know about the quality of UK jobs
• What share of the economic pie goes to workers?