The latest data for the UK labour market (covering July to September and provisional October 2025) indicates a continued cooling trend. This is primarily evidenced by a fall in payrolled employees, a rise in the unemployment rate to 5.0%, and only a small increase in job vacancies, suggesting a stable but cautious hiring environment.
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, but with persistent wage cost pressures.
- Payrolled Employee Decline Confirmed: The more reliable PAYE Real Time Information (RTI) data shows a significant decline in payrolled employees, with a provisional drop of 180,000 (0.6%) over the year to October 2025. This points to businesses either shedding staff or being extremely cautious about hiring.
- Continued Strong Nominal Wage Growth: Annual nominal regular earnings growth remains strong at 4.6% (July to Sept 2025), with the public sector significantly outpacing the private sector (6.6% vs 4.2%). Despite the cooling job market, competitive salaries are still required to attract and retain talent, suggesting cost pressures are not yet easing on the wages front.
- Vacancy Levels Stabilising: The number of job vacancies is broadly unchanged on the quarter, with a small increase of only 2,000 to 723,000 (August to October 2025). This indicates that the demand for new hires has plateaued at a lower level, supporting a cautious hiring approach.
- Focus on Cost and Efficiency: With the Claimant Count increasing to 1.696 million and 39,000 working days lost to disputes in September 2025, employers may be under pressure to manage internal efficiencies and labour relations, with external hiring taking a back seat.
What This Means for Candidates
Job seekers are entering a market with increased competition but where real-terms pay is still growing.
- Increased Competition: The unemployment rate has risen to 5.0% (July to Sept 2025), and is up on both the quarter and the year. Coupled with the persistent fall in payrolled employees, this means candidates face more competition for a reduced number of roles, potentially leading to longer job search times.
- Modest Real-Terms Pay Growth: While nominal pay growth is high, the annual growth in real terms (adjusted for inflation using CPIH) is a modest 0.5% for regular pay and 0.7% for total pay. This means that pay increases are only just outpacing rising living costs.
- Skills Remain Key: The slowing market increases employer selectivity. Candidates with in-demand skills and those who can clearly demonstrate their immediate value will be best positioned for success.
- Volatile Data Caution: Due to ongoing volatility in the Labour Force Survey (LFS), candidates should use other metrics like the more reliable RTI employee data (which is falling) to gauge the true level of market activity.
Labour Market Indicators at a Glance
| Indicator | Latest Estimate (Period) | Change on Quarter | Change on Year |
| Payrolled Employees (Provisional RTI) | 30.3 million (Oct 2025) | Down 32,000 (0.1%) | Down 180,000 (0.6%) |
| Employment Rate (Aged 16-64) | 75.0% (Jul-Sept 2025) | Down (0.2pps) | Up |
| Unemployment Rate (Aged 16+) | 5.0% (Jul-Sept 2025) | Up (0.3pps) | Up |
| Economic Inactivity Rate (Aged 16-64) | 21.0% (Jul-Sept 2025) | Largely Unchanged (0.0pps) | Down |
| Job Vacancies | 723,000 (Aug-Oct 2025) | Up 2,000 (0.2%) | Down 99,000 |
| Regular Nominal Pay Growth | 4.6% (Jul-Sept 2025) | N/A | N/A |
| Regular Real Pay Growth (CPIH) | 0.5% (Jul-Sept 2025) | N/A | N/A |
| Claimant Count | 1.696 million (Oct 2025) | Up (on month) | Down (on year) |
Note on Data Quality: We continue to advise additional caution when interpreting Labour Force Survey (LFS) change measures, such as the Employment and Unemployment rates, due to increased volatility from ongoing LFS improvements. The RTI data is generally considered the more reliable read on the number of employees, which continues to fall.
Conclusion
The October 2025 Labour Market Report points to a softening UK labour market, driven by significant reductions in payrolled employees and rising unemployment, despite nominal wage growth remaining elevated. Both employers and candidates must factor in increased market competition and cautious hiring sentiment into their strategies.
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/november2025
