The latest data for the UK labour market (covering September to November and provisional December 2025) indicates a continued cooling trend, marked by a steady contraction in payrolled employees and a stable but elevated unemployment rate of 5.1%. While vacancies showed a marginal uptick, the overarching sentiment remains one of business caution and a focus on cost management.
As your local recruitment specialist, we pride ourselves on providing you with up-to-date market knowledge. Here is an overview of the latest data and what it means for you, whether you are a candidate seeking a new position or a business navigating recruitment in Northamptonshire.
What This Means for Employers
The market continues to show a tightening of the labour supply in specific niches, but with persistent wage cost pressures and a clear reduction in overall headcount.
- Payrolled Employee Decline Gathers Pace: The reliable PAYE Real Time Information (RTI) data shows a provisional drop of 184,000 (0.6%) over the year to December 2025. This downward trend in 8 of the last 12 months suggests that businesses are increasingly hesitant to expand headcounts in the current economic climate.
- Persistent Wage Pressures: Annual nominal regular earnings growth remains high at 4.5%. However, the gap between the public sector (7.9%) and the private sector (3.6%) is stark. Employers must remain competitive to attract talent, even as margins are squeezed by these costs.
- Vacancy Stability: Early estimates for October to December 2025 show a small increase of 10,000 vacancies to 734,000. This suggests that while the “hiring frenzy” is over, there is a consistent “replacement demand” as businesses seek to fill essential roles.
- Operational Disruptions: With 155,000 working days lost to labour disputes in November 2025—the highest in nearly two years—businesses are navigating a complex landscape of internal stability and industrial action, particularly in the health and social work sectors.
What This Means for Candidates
Job seekers are entering a market with increased competition, where “real-terms” pay growth remains slim, making the security of permanent roles more vital.
- Increased Competition: The unemployment rate stands at 5.1%, up on both the quarter and the year. As payrolled employee numbers continue to fall, candidates should prepare for a more crowded application field and potentially longer hiring timelines.
- Tight Real-Wage Margins: While nominal pay growth is 4.5%, “real-terms” growth (adjusted for inflation) is just 0.9%. This means that while pay packets are growing, purchasing power is barely moving, making starting salary negotiations a critical factor for any new role.
- Focus on Stability: With self-employment seeing volatility, the appeal of a permanent, payrolled position has increased. Candidates are increasingly prioritising job security and benefits packages that offer long-term protection.
- Sector-Specific Opportunities: Despite the general cooling, 734,000 vacancies remain. Candidates with niche skills or those looking to move into the public sector (where wage growth is currently highest) may find significant opportunities if they can demonstrate immediate value.
| Indicator | Latest Estimate (Period) | Change on Quarter | Change on Year |
| Payrolled Employees (RTI) | 30.2 million (Dec 2025) | Down 43,000 (0.1%) | Down 184,000 (0.6%) |
| Employment Rate (16-64) | 75.1% (Sept-Nov 2025) | Largely Unchanged | Up (Year-on-Year) |
| Unemployment Rate (16+) | 5.1% (Sept-Nov 2025) | Up (0.3pps) | Up (on year) |
| Economic Inactivity Rate | 20.8% (Sept-Nov 2025) | Down (0.2pps) | Down (on year) |
| Job Vacancies | 734,000 (Oct-Dec 2025) | Up 10,000 (1.3%) | Down 69,000 |
| Regular Nominal Pay Growth | 4.5% (Sept-Nov 2025) | N/A | N/A |
| Regular Real Pay Growth (CPI) | 0.9% (Sept-Nov 2025) | N/A | N/A |
| Claimant Count | 1.677 million (Dec 2025) | Up (on month) | Down (on year) |
Note on Data Quality: We advise additional caution when interpreting Labour Force Survey (LFS) change measures due to ongoing volatility from survey improvements. The RTI data remains the most reliable indicator for employee numbers, which continue to trend downwards.
Conclusion
The January 2026 data confirms a softening UK labour market. While vacancies have plateaued, the consistent drop in payrolled employees and the rise in unemployment suggest a more cautious approach from UK businesses. Both employers and candidates must factor this increased competition and focus on “real-term” value into their strategies for the year ahead.
Impact Recruitment is well-equipped to assist in navigating these complexities, providing expertise, efficiency, and access to quality talent and opportunities.
If you are a candidate or a business and would like more information on the local labour market in Northamptonshire, please contact us on 01604 239555 or email info@impactrecruitment.co.uk, and a member of our team will be in touch.
Read the full report – https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/uklabourmarket/january2026
