The June 2025 Labour Market Report remains consistent with trends to previous months whereby the labour market is cooling, despite the overall employment rate showing a modest increase and strong nominal wage growth. This is due to the decline in payrolled employees, coupled with rising unemployment and falling vacancies.
Furthermore, the report advises caution when interpreting certain data points, particularly early estimates for May 2025 and LFS estimates from mid-2023 to 2024 due to increased volatility. It emphasises using a suite of labour market indicators for a comprehensive understanding, as different sources (LFS, Workforce Jobs, PAYE RTI) measure different aspects and can show divergences.
Employment and Payroll:
- Decreasing Payrolls: The number of payrolled employees in the UK saw a notable decrease. It fell by 55,000 (0.2%) between March and April 2025 and by 115,000 (0.4%) year-on-year to April 2025. Early estimates for May 2025 suggest a further significant monthly decrease of 109,000 (0.4%) and a yearly decrease of 274,000 (0.9%), bringing the total to 30.2 million. However, these early estimates for May are subject to substantial revision.
- Overall Employment Rate Up: Despite the fall in payrolled employees, the UK employment rate for those aged 16-64 was estimated at 75.1% in February to April 2025, which is an increase compared to a year ago and the previous quarter. This divergence highlights the different methodologies of data collection (PAYE RTI vs. Labour Force Survey and Workforce Jobs).
- Workforce Jobs Increase: The total number of Workforce Jobs in the UK increased to 37.1 million in March 2025, up by 187,000 (0.5%) from December 2024 and 304,000 (0.8%) from a year ago.
- Public Sector Employment Growth: Public sector employment rose to 6.15 million in March 2025, an increase of 7,000 (0.1%) from December 2024 and 35,000 (0.6%) from March 2024.
Unemployment and Inactivity:
- Rising Unemployment: The UK unemployment rate for people aged 16 and over increased to 4.6% in February to April 2025. This is higher than a year ago and the previous quarter, reaching its highest level since May-July 2021.
- Claimant Count Up: The UK Claimant Count for May 2025 increased both month-on-month and year-on-year, reaching 1.735 million.
- Decreasing Economic Inactivity: The UK economic inactivity rate for those aged 16-64 was estimated at 21.3% in February to April 2025, showing a decrease from a year ago and the previous quarter.
Vacancies and Earnings:
- Continued Decline in Vacancies: The estimated number of vacancies in the UK fell by 63,000 on the quarter to 736,000 in March to May 2025. This marks the 35th consecutive quarterly decline, with vacancies now below pre-pandemic levels.
- Strong Wage Growth (Nominal): Annual growth in employees’ average regular earnings (excluding bonuses) in Great Britain was 5.2% in February to April 2025, with total earnings (including bonuses) at 5.3%. Public sector wage growth (5.6%) outpaced the private sector (5.1%).
- Real Terms Wage Growth: When adjusted for inflation (CPIH), annual growth in real terms was 1.4% for regular pay and 1.5% for total pay in February to April 2025.
- Working Days Lost: Approximately 47,000 working days were lost due to labour disputes in April 2025.
Conclusion
The June 2025 Labour Market Report showed that the keys trends from previous months remain consistent. Despite this, challenges remain, particularly in terms of economic inactivity and employment which are both still less favourable than pre-pandemic levels.
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