Labour Market Statistics, August 2025

This quarterly briefing sets out analysis of the Labour Market Statistics published this morning covering the period from April 2025 to June 2025. 

Employment and inactivity have modestly improved while unemployment remains flat. Data suggests divergence between the LFS and HMRC PAYE data. The downward trend in the employment level depicted by the administrative data is not being represented by the LFS.

Over the past five years the UK workforce has shrunk by 800,000. Long-term ill health remains the leading cause of inactivity and people with long-term ill health continue to see widening employment gaps. Younger people, particularly 16-24-year-olds have witnessed a modest reduction in economic inactivity, but they continue to face a widening employment gap.

Today’s labour market data signals a clear decline in employer confidence, with vacancies falling across most sectors for the 37th consecutive quarter and further declines in the number of payrolled employees. Labour-intensive sectors such as hospitality, administration, retail, construction, and manufacturing have also seen significant reductions in payrolled employees.

The decline in vacancies and employment in hospitality points to the impact of rising employer costs, notably the increases to National Insurance contributions (NICs) and the National Living Wage (NLW) introduced in April. The decline in vacancies and payrolled employees in sectors like information and communication, and professional scientific and technical activities may reflect not just cost pressures, but also efficiency gains from adopting AI technologies. 

Slowing pay growth, employment gaps for certain demographic groups, coupled with declining vacancies and payrolls, points to increasing employer caution and a cooling labour market.