21st July 2026
The latest regional labour market figures from the Office for National Statistics (ONS) paint a mixed picture of the UK economy. While Scotland continues to enjoy relatively high levels of employment, there are signs that the jobs market is becoming more challenging across much of the country.
The ONS stresses that its Labour Force Survey has been improved over the past two years and that users should be cautious about reading too much into short-term movements. Instead, it recommends looking at the broader trends alongside other indicators such as payroll employment and claimant counts.
UK Picture
Across the UK between March and May 2026:
Employment rate: 75.1%
Unemployment rate: 4.9%
Economic inactivity: 20.9%
Compared with the previous quarter, the overall picture changed very little. Employment edged up slightly, unemployment fell marginally, and economic inactivity also dipped.
However, the stability in these headline figures masks significant regional differences.
Scotland's Position
For Scotland, the latest figures show:
Employment rate: 74.3%
Unemployment rate: 4.7%
Economic inactivity: 21.8%
Compared with the previous quarter:
Employment increased by 0.3 percentage points.
Unemployment increased by 0.5 percentage points.
Economic inactivity fell by 0.8 percentage points.
Compared with a year earlier:
Employment has slipped by 0.6 percentage points.
Unemployment has risen by 1.3 percentage points.
Economic inactivity has fallen slightly.
In simple terms, Scotland still has a relatively strong labour market, but unemployment has been creeping upwards over the past year while employment has eased back slightly.
Big Regional Differences
The figures highlight how uneven the UK's labour market has become.
The South East continues to record the strongest employment rate at 78.2%, closely followed by the East of England on 78.1%.
At the other end of the scale, the North East of England has the lowest employment rate at 71.5%.
London remains an outlier. Although it has one of the country's strongest economies, it also records the highest unemployment rate at 6.5%, reflecting the capital's large and fast-moving labour market.
Northern Ireland has the lowest unemployment rate at just 1.8%, but also the highest economic inactivity rate at 26.5%, showing that many people are outside the labour force altogether rather than actively seeking work.
Payroll Employment Falls Across Britain
Another important finding comes from HMRC payroll data.
The number of people on employer payrolls has fallen over the past year in every UK nation and region except Northern Ireland.
Northern Ireland was the only part of the UK to record an increase, with payroll employment rising by 1.4% compared with June 2025.
Although payroll data for June remain provisional and may be revised, the overall trend suggests employers are becoming more cautious about recruitment.
What Does This Mean?
The labour market is no longer as tight as it was a year or two ago.
Employers continue to recruit, but many are doing so more cautiously as they face higher wage bills, rising National Insurance costs, and ongoing economic uncertainty.
For workers, this means jobs are still available, but competition for vacancies may gradually increase if hiring continues to slow.
For Scotland, the figures suggest the labour market remains resilient, but the rise in unemployment over the past year indicates that conditions have become less favourable than they were in 2025.
Looking Ahead
The ONS emphasises that no single dataset tells the whole story. Labour market conditions should be assessed alongside earnings, vacancies, payroll employment and benefit claimant figures.
With inflation, interest rates and business costs continuing to influence employers' decisions, the labour market will remain one of the key indicators of how well the UK economy performs during the second half of 2026.
For businesses across Caithness and the Highlands, these figures suggest that while widespread job losses are not yet evident, the rapid post-pandemic labour shortages are easing. Recruitment may become slightly easier, but employers are still likely to face competition for skilled workers in sectors such as construction, engineering, healthcare and hospitality.