The Unemployment Number Are Rising But They Do Not Show The Full Picture - It's Worse

18th August 2025

The unemployment numbers are rising modestly due to people being counted in other ways such as on sickness benefits or retired but effectively less people presenting for work.

Unemployment is defined narrowly: people without a job, actively seeking work, and available to start.

Economic inactivity covers people who are not in work and not looking (so they don't count as "unemployed"), such as long-term sick, students, carers, or retirees below state pension age.

The unemployment rate has risen to around 4.7% (about 1.67m people) up modestly compared with a year ago.

By contrast, the number of working-age people economically inactive due to long-term sickness is at a record high to over 2.8 million. This has been one of the biggest drivers of falling participation since the pandemic.

Early and "hidden" retirement among people in their late 50s and early 60s has also grown since COVID, though some of this was later reversed when people returned due to cost-of-living pressures.

The labour market shows a shrinking pool of available workers — not just through rising unemployment, but more importantly through a large increase in inactivity.

If many older workers with health problems or caring responsibilities are no longer seeking work, they are not counted as unemployed, but they reduce the overall labour supply just as much or more.

This helps explain why job vacancies can fall while unemployment rises only modestly. Fewer people are even in the labour market to compete for jobs.

The modest rise in unemployment is partly because large numbers who might otherwise show up as unemployed are instead counted as economically inactive especially due to long-term sickness and earlier-than-expected retirement.