Labour market indicators

The UK economy contracted in May for a second consecutive month. However, business confidence is reasonably robust, and the economy is not expected to formally go into a recession.

The situation for jobs is worse. Unemployment was 4.7% in May — the highest level in four years. There were 178,000 fewer payrolled employees in June 2025 than in June 2024, a 0.6% fall, although this estimate is provisional.

About one in four employers were planning to make redundancies between May and July according to the CIPD HR body. Businesses have blamed higher employment costs following the autumn Budget, but the reality is that there is a global slowdown in economic activity.

Despite the economic situation, earnings are still increasing at a decent rate. Average earnings in Great Britain were up 5.0% (for both total and regular pay) in March to May 2025 compared to a year ago. So, pay is rising in real terms as it has beaten inflation.

However, aggregate earnings are influenced by compositional factors and the incomes of top earners, so it doesn’t tell us anything about distribution.

In June, the number of people seeking work increased at the fastest rate since the height of the Covid pandemic in 2020, according to the Recruitment and Employment Confederation.