Labour Market in Scotland - Employment, Unemployment, and Inactivity

12th July 2025

Scotland's labour market has remained resilient at the start of 2025 in the face of elevated economic uncertainty, however there are indications that conditions have slightly softened over the past year.

Based on the Labour Force Survey for February to April, Scotland's unemployment rate (4.2%) rose 0.4 percentage points (p.p) over the quarter but is 0.6 p.p lower than at the same time last year. Alongside this, Scotland's employment rate (75.0%) rose 0.9 p.p. over the quarter and by 2.1 p.p over the year and the inactivity rate (21.6%) fell by 1.3 p.p over the quarter and by 1.8 p.p over the year.

Pay as you Earn Real Time Information data for May indicates some softening with the number of payrolled employees in Scotland (2.44 million) falling by 0.3% (c. 7,800 employees) over the month and by 0.9% (c. 22,800 employees) annually.

However, Scotland's Claimant Count unemployment rate remained stable at 3.5% in May, with the number of people claiming unemployment related benefits in Scotland (106,947) up 1.4% over the month but down 0.9% over the past year.

Recruitment Activity
Demand for labour has been stabilising over the past 18 months from more elevated levels in 2022 and 2023 and most recently has been impacted by a range of factors including increased economic uncertainty and labour costs.

ONS Textkernel data shows the number of new online job adverts posted has increased since the start of the year with c. 52,300 new online job adverts posted in Scotland in May, down 1.7% from May last year. In the UK as a whole, posting of new online job adverts rose 1.1% over the year in May.

Most recently, BICS data indicated a relatively stable demand outlook with the majority of businesses in June (65.6%) expecting their employee numbers to remain unchanged. This has picked back up in recent months as the share of businesses expecting employee numbers to increase fell to 17.2% and the share of businesses expecting a decrease in the number of employees fell to 10.8%.

The increased share of businesses expecting to retain their current staffing levels likely reflects the increased uncertainty in economic and labour market conditions. The Scottish Chambers of Commerce Quarterly Economic Indicator for Q2 2025 reported that 65% of firms expect staff levels to not change in the next quarter while the RBS Growth Tracker business survey indicated private sector staffing levels remained broadly stable in June.

Earnings
Labour earnings have continued a trend of positive real terms growth, albeit at a slower pace than in 2024, partly reflecting the pick-up in inflation rate.

Nominal median monthly PAYE pay in Scotland (£2,542) grew by 5.3% on an annual basis in May, with the pace of growth unchanged from April. In real terms, adjusting for inflation, earnings grew 1.9%, picking-up marginally from 1.8% in May as inflation edged downward. The pace of nominal growth is slightly lower than the average annual rate in 2024, however it has been more stable over the past twelve months following the volatility in recent years.

Looking ahead, earnings growth is expected to further moderate. The Bank of England Decision Maker's Panel (DMP) reported annual UK wage growth of 4.6% in the 3-months to June and anticipated year-ahead wage growth of 3.6%.

This an extract from The Scottish Economic Bulletin July 2025
Read the full report HERE
www.kelvinprobe.com