Labour Market Overview, UK: January 2026
The latest data show a continued cooling in payrolled employment, but early signs of resilience in vacancies and real wage growth suggest the recruitment market may be approaching a stabilisation phase.
Employment Trends – Job Numbers Edge Lower
Payrolled employment continued to decline as 2025 came to a close. The number of people on company payrolls fell by 155,000 (0.5%) compared with November last year, with a smaller monthly drop of 33,000 between October and November 2025.
Looking at the broader September to November period, payrolled jobs were down by 135,000 year-on-year, underlining the slower pace of hiring seen throughout the second half of the year. Early figures for December suggest the downward trend continued, with a provisional fall of 184,000, taking total payrolled employees to 30.2 million.
For recruiters, this reflects ongoing caution from employers, with many businesses choosing to pause expansion plans rather than actively cut roles.
Employment, Unemployment and Inactivity – A Mixed Picture
Despite fewer people on payrolls, overall employment remains relatively resilient. The employment rate held steady at 75.1%, slightly higher than a year ago, suggesting many people are still finding work.
However, the unemployment rate edged up again to 5.1%, pointing to growing competition for available roles. Encouragingly, economic inactivity continued to fall, down to 20.8%, meaning more people are either working or actively looking for work — a positive sign for long-term labour supply.
Vacancies – A Small Lift After a Long Decline
After nearly three years of falling vacancy numbers, early estimates suggest a modest increase. Vacancies rose by 10,000 to 734,000 between October and December 2025.
While this is only a slight improvement, it may indicate that hiring demand is beginning to level out. Recruiters report that firms are focusing on essential hires, particularly in public services, healthcare and specialist roles, rather than broad-based recruitment drives.
Pay and Earnings – Real Wages Continue to Improve
Pay growth continued to slow but remained positive. Average regular pay rose by 4.5%, while total earnings increased by 4.7%. Public sector pay growth remained higher than the private sector, although this reflects earlier pay deals rather than new increases.
Importantly for workers, wages are still growing faster than inflation. In real terms, regular pay rose by 0.6%, offering modest improvements in living standards.
What This Means for Recruiters
For the recruitment industry, the message is clear: hiring remains cautious, but the market is no longer deteriorating rapidly. With vacancies stabilising and real wages improving, early 2026 may mark a transition from slowdown to steadier, more targeted hiring.
Office for National Statistics (ONS), released 20 January 2026, ONS website, statistical bulletin, Labour market overview, UK: January 2026
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