The July 2025 Labour Market Report indicates a continued cooling of the labour market, primarily driven by a persistent decline in payrolled employees, rising unemployment, and falling vacancies. While the overall employment rate shows a modest increase, strong nominal wage growth is also observed.
Caution is advised when interpreting certain data points, particularly Labour Force Survey (LFS) estimates from mid-2023 and throughout 2024, due to increased volatility. It is crucial to consult a variety of labour market indicators, as different sources (LFS, Workforce Jobs, PAYE RTI) measure distinct aspects and may diverge. Notably, HM Revenue and Customs (HMRC) PAYE Real Time Information (RTI) is currently considered more reliable for employee numbers, which continue to fall. This report also includes both accredited official statistics and official statistics in development, requiring careful consideration.
Employment and Payroll:
- Decreasing Payrolls: The number of payrolled employees in the UK continues to decline. Estimates show a decrease of 25,000 (0.1%) between April and May 2025, and a larger year-on-year fall of 135,000 (0.4%) since May 2024. Over the March to May 2025 quarter, payrolled employees fell by 68,000 (0.2%). Early, provisional data for June 2025 indicates a further drop of 41,000 (0.1%) on the month and 178,000 (0.6%) on the year, bringing the total to 30.3 million. These early figures are subject to significant revision, as highlighted by a substantial upward adjustment to the May 2025 figures from an initial decrease of 109,000 to 25,000.
- Overall Employment Rate Up: Despite the fall in payrolled employees, the UK employment rate for those aged 16-64 years was estimated at 75.2% in March to May 2025. This represents an increase compared to estimates a year ago and is up in the latest quarter. This divergence highlights the different methodologies of data collection.
- Workforce Jobs: (No new data provided for this period in the latest information. Previous data noted an increase to 37.1 million in March 2025.)
Unemployment and Inactivity:
- Rising Unemployment: The UK unemployment rate for people aged 16 years and over increased to 4.7% in March to May 2025. This is higher than estimates of a year ago and up in the latest quarter.
- Claimant Count Up: The UK Claimant Count for June 2025 increased both month-on-month and year-on-year, reaching 1.743 million.
- Decreasing Economic Inactivity: The UK economic inactivity rate for those aged 16-64 years was estimated at 21.0% in March to May 2025, showing a decrease from estimates a year ago and down in the latest quarter.
Vacancies and Earnings:
- Continued Decline in Vacancies: The estimated number of vacancies in the UK fell by 56,000 on the quarter to 727,000 in April to June 2025. This marks the 36th consecutive quarterly decline, with vacancies now falling in 14 of the 18 industry sectors and below pre-pandemic levels. Feedback suggests some firms may not be recruiting new workers or replacing those who have left.
- Strong Wage Growth (Nominal): Annual growth in employees’ average earnings in Great Britain for both regular earnings (excluding bonuses) and total earnings (including bonuses) was 5.0% in March to May 2025. Public sector wage growth (5.5%) outpaced the private sector (4.9%).
- Real Terms Wage Growth: When adjusted for inflation, annual growth in real terms in March to May 2025 was:
- Using CPIH: 1.1% for regular pay and 1.0% for total pay.
- Using CPI: 1.8% for regular pay and 1.7% for total pay.
- Working Days Lost: Approximately 37,000 working days were lost due to labour disputes across the UK in May 2025.
What This Means for Employers:
The cooling labour market presents a mixed picture for employers across the UK, including those in Northampton.
- Increased Candidate Availability: With falling payrolled employees and rising unemployment, there is generally a larger pool of candidates available for open positions. This could lead to a greater number of applicants applying for roles, increasing the time taken sort through advert response.
- Persistent Wage Pressures (Nominal): Despite the cooling, nominal wage growth remains relatively strong at 5.0%. This indicates that while the market is softening, employers may still face pressure to offer competitive salaries to attract and retain talent, especially for highly skilled or in-demand roles.
- Reduced Demand for New Hires: The continuous decline in vacancies, coupled with feedback that some firms are not recruiting or replacing leavers, suggests a more cautious hiring environment. Employers may be prioritising internal mobility, upskilling existing staff, or simply operating with leaner teams to manage costs amid economic uncertainty and rising employer contributions (e.g., National Insurance, National Living Wage).
- Focus on Retention and Efficiency: In this environment, retaining key talent becomes even more crucial. Employers may shift focus from aggressive external hiring to nurturing their current workforce through development, engagement, and effective succession planning to avoid the costs and disruptions associated with turnover.
How We Can Help Employers:
- Access to a Wider Talent Pool: We have extensive databases of pre-vetted candidates, including those who may not be actively seeking new roles. Partnering with us can significantly broaden an your reach beyond traditional job boards, especially when the overall pool of actively searching candidates is larger.
- Market Insight and Expertise: Our recruitment specialists possess real-time knowledge of market trends, salary benchmarks, and candidate availability within a variety of sectors across Northamptonshire. We are able to advise on realistic expectations, competitive compensation packages, and effective recruitment strategies to attract the best fit.
- Time and Cost Efficiency: By handling the end-to-end recruitment process – from sourcing and screening to initial interviews and offer management – our partnership will free up valuable internal resources for your business. This can reduce the overall time-to-hire and potentially lower recruitment costs by avoiding lengthy, unproductive hiring cycles.
- Quality and Cultural Fit: Impact focus on not just matching skills but also assessing cultural fit, ensuring successful candidates align with company values and the company environment. Additionally, as third-party experts, we provide an objective assessment of candidates, helping to mitigate unconscious bias and ensure a fair and merit-based hiring process. This is vital for long-term retention in a market where replacing employees can be costly.
- Flexibility and Strategic Staffing: For businesses looking for agility, we offer tailored recruitment solutions to solve your needs. Whether the need is to manage fluctuating workloads and skill gaps through temporary hires or to retain a candidate for long-term stability with permanent solutions, we can help!
What This Means for Candidates:
For job seekers in Northampton and across the UK, the current labour market trends suggest an evolving landscape:
- Increased Competition for Roles: With rising unemployment and falling vacancies, candidates are likely to face more competition for fewer available jobs. This means applications may need to stand out more, and job searches could take longer.
- Importance of Skills and Experience: Employers are becoming more selective. Candidates with in-demand skills, relevant experience, and a clear demonstration of their value will have a significant advantage. Continuous upskilling and professional development can enhance your marketability.
- Wage Growth Nuances: While nominal wage growth remains strong, the real-terms increase is more modest. This means that while pay might look good on paper, its purchasing power might not increase as much as hoped, or it might just be keeping pace with inflation. It’s important to consider the full compensation package.
- Opportunity in Returning to Work: A decrease in economic inactivity means more people are joining or re-joining the workforce. This intensifies competition for jobs, especially in entry-level or less specialised fields, making it crucial for candidates to differentiate themselves.
- Proactive Job Search is Key: Waiting for opportunities to appear may not be as effective. A proactive approach, including networking, direct applications, and leveraging professional contacts, will be more beneficial.
How We Can Help Candidates:
As a recruitment agency, we are uniquely positioned to assist candidates in navigating this challenging yet opportunity-filled market:
- Access to Unadvertised Roles: Many companies work exclusively with us to fill positions, meaning we have access to a variety of roles that are never publicly advertised. This gives our candidates an exclusive advantage.
- Market Insights and Expert Guidance: Our consultants possess up-to-date knowledge of the local labour market, including salary trends, in-demand skills, and industry-specific insights. We can offer personalised advice on optimising your CV, improving interview techniques, and positioning yourself effectively.
- Targeted Job Matching: We don’t just send generic job listings. We take the time to understand candidate’s skills, experience, career aspirations, and cultural fit to successfully match opportunities that genuinely align with candidate goals and maximise their chances of success.
- Application and Interview Preparation: We provide tailored support, from refining CVs and cover letters to tailored interview preparation, including insights into company culture and interview style. We can help highlight strengths and effectively address any potential gaps.
- Confidentiality and Professional Representation: For candidates currently employed, we can conduct their job search discreetly, ensuring their current employer is unaware until the appropriate time. We also act as a professional intermediary, handling initial communications, negotiations, and feedback.
- Long-Term Career Partnership: Our relationship doesn’t end when the role is secured. We aim to be a long-term career partner, offering advice and support as their career develops, helping identify future opportunities and growth paths.
Conclusion
The July 2025 Labour Market Report reinforces the ongoing trend of a cooling labour market, evidenced by continued falls in payrolled employees, rising unemployment, and a sustained decline in vacancies. While the employment rate shows a modest increase and nominal wage growth remains robust, challenges persist, particularly as economic inactivity and employment levels are still less favourable than pre-pandemic figures.
Both employers and candidates must adapt their strategies to leverage increased candidate availability (for employers) and manage increased competition (for candidates), while navigating wage expectations and focusing on retention and skill development. Impact Recruitment are well-equipped to assist your business when 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, please contact us on 01604 239555 or email info@impactrecruitment.co.uk, and a member of our team will be in touch.
