The UK Labour Market Report for May 2025 paints a picture of a gradually cooling market, with signs of softening demand for labour. This overview reveals trends that will significantly impact local businesses’ recruitment strategies.
Labour Market Report May 2025 Summary for the UK:
- Job Vacancies Job vacancies continue their downward trend, suggesting a softening in demand for new hires. The estimated number of vacancies in the UK fell by 42,000 to 761,000 in February to April 2025 compared to the previous quarter. This marks the 34th consecutive quarterly decline, and vacancies are now 34,000 below pre-pandemic (January to March 2020) levels.
- Nominal and Real Earnings While nominal wage growth remains robust, real earnings, when adjusted for inflation, show signs of slowing. Annual growth in employees’ average regular earnings (excluding bonuses) in Great Britain was 5.6% in January to March 2025. In real terms (adjusted for CPIH inflation), regular pay growth was 1.8% for the same period, slightly down from the previous month.
- Payrolled Employees The number of payrolled employees has seen a slight decline, indicating a plateauing or slight contraction in overall employment. Early estimates show a decrease of 33,000 (0.1%) on the month compared to March 2025, reaching 30.3 million. This follows a decrease of 47,000 between February and March 2025.
- Employment Rate The employment rate has remained largely stable, but with some underlying shifts in the types of employment. These shifts include a move from full-time to part-time employment and an increase in second income jobs, as well as growth driven by people working for an employer, rather than self-employment or other categories. The UK employment rate for people aged 16 to 64 years was estimated at 75.0% in January to March 2025, largely unchanged compared to the previous quarter.
- Unemployment Rate The unemployment rate has seen an uptick, suggesting a slight loosening of the labour market. The UK unemployment rate for people aged 16 years and over was estimated at 4.5% in January to March 2025, an increase of 0.2 percentage points compared to the previous quarter.
- Inactivity Rate The economic inactivity rate has shown a slight decrease, indicating more people are entering or returning to the labour force. The UK economic inactivity rate for people aged 16 to 64 years was estimated at 21.4% in January to March 2025, a decrease of 0.2 percentage points compared to the previous quarter.
Impact on Local Businesses’ Recruitment and how Impact Can Help:
This softening labour market presents both challenges and opportunities for local businesses. The continued decline in job vacancies suggests less competition for talent, but the rise in unemployment and slight fall in payrolled employees means businesses may still need to be strategic in their hiring to attract the right candidates. While wage growth is easing, it remains strong in nominal terms, meaning businesses need to carefully manage their compensation structures.
Impact is perfectly positioned to assist businesses in navigating these evolving conditions. With a more relaxed market, we can help businesses attract quality candidates by:
- Targeted Sourcing: Leveraging our extensive network and specialised tools to identify and engage candidates who may not be actively seeking new roles but possess the desired skills and experience.
- Competitive Compensation Guidance: Providing up-to-date insights on local salary benchmarks and benefits packages to ensure businesses offer competitive remuneration without overspending, especially given the continued nominal wage growth.
- Highlighting Employer Brand: Assisting businesses in crafting compelling job descriptions and promoting their unique culture and growth opportunities to stand out to a larger pool of available talent.
- Efficient Candidate Screening: Taking on the initial screening and vetting processes, saving businesses valuable time and resources while ensuring a strong shortlist of qualified individuals.
- Access to Inactive Talent: Proactively engaging with individuals who may be economically inactive but are now considering re-entering the workforce, potentially uncovering untapped talent pools.
By partnering with our agency, local businesses can effectively adapt to the current labour market, optimising their recruitment efforts to secure the best talent in a cooling yet competitive environment.
Source: https://bit.ly/4kEx5hQ (ONS: Labour Market Overview, May 2025)
