UK labour market weakening as it sheds 72,000 jobs in past three months while real pay flatlines

18th May 2025

The Resolution Foundation's employment rate estimate suggest that it has fallen by 1.3 per cent over the past 23 months, it said in response to the latest ONS labour market statistics.

The number of payrolled jobs fell by 72,000 in the first three months of the year, while the flash estimate suggests a further 36,000 drop in April.

The Foundation’s employment rate estimate - which combines the latest HMRC payroll data and (FOIed) self-employment statistics with ONS population estimates – suggest that the UK’s 16-64 employment rate has fallen from a recent peak of 76.5 per cent in April 2023 to 75.2 per cent in March 2025. Until recently, the fall in the employment rate has been driven by employment failing to keep pace with population growth, but job numbers are falling too now.

There were further signs of labour market weakness in the vacancies data, with the number falling by 42,000 in the first three months of the year, while pay growth is also starting to slow. Quarter-on-quarter private sector regular pay growth slowed from the equivalent of 6.4 per cent a year, to 3.4 per cent since the end of 2024. Real pay has flatlined, rising by only 0.1 per cent in the past six months.

Early indications suggest the combination of rising employer National Insurance and a higher minimum wage in April is having a dampening effect on employment. The hospitality sector – which has the largest share of low-paid workers – has had a bigger than average employment fall (down 3.2 per cent since October, compared to 0.5 per cent across the economy).

Nye Cominetti, Principal Economist at the Resolution Foundation, said "While recent UK data on growth has been encouraging, the labour market picture is a major worry. The number of payrolled jobs has fallen by 72,000 over the past three months, while real wages have barely grown since last Autumn.

"The recent rise in employer National Insurance may have accelerated this slowdown, with the number of hospitality jobs falling particularly sharply since the tax rise came into effect in April."