Labour Market Overview, UK: February 2026
The UK jobs market continues to cool, but the pace of decline is slowing. With payroll numbers dipping only slightly and vacancies broadly stable, the recruitment industry may be seeing the early stages of a more balanced market.
Employment Trends – Job Losses Slow Sharply
The number of people on UK company payrolls fell by 121,000 (0.4%) compared with December 2024. However, the monthly drop between November and December 2025 was just 6,000, suggesting the rate of decline is easing.
Looking at the wider October to December 2025 period, payroll employment was down 130,000 year-on-year and 46,000 over the quarter. Early estimates for January 2026 show a further small fall of 11,000, bringing total payrolled employees to 30.3 million. As always, these early figures are provisional and may be revised.
For recruiters, this points to caution rather than crisis. Employers are still holding back on large-scale hiring but are not accelerating job cuts.
Employment and Unemployment – Competition Increases
The employment rate stood at 75.0%, slightly down on the previous quarter but unchanged compared with a year ago. Meanwhile, unemployment rose to 5.2%, indicating that more people are now actively looking for work.
Economic inactivity continued to fall to 20.8%, meaning more people are either in work or searching for jobs. For recruitment businesses, this means a slightly larger talent pool — but also more competition for each open role.
The Claimant Count rose month-on-month to 1.691 million, though it remains lower than a year ago. Recent revisions suggest these figures often adjust downward over time.
Vacancies – Signs of Stability
Vacancy numbers have levelled off after a long period of decline. Early estimates for November 2025 to January 2026 show a small rise of 2,000, taking total vacancies to 726,000.
While hiring demand remains well below peak levels seen in recent years, the stabilisation suggests employers may have reached a pause point rather than continuing to pull back.
Pay Growth Slows but Real Wages Still Rising
Average pay growth cooled further, rising 4.2% for both regular and total earnings. Public sector pay growth (7.2%) remains higher than private sector growth (3.4%), largely due to earlier pay settlements.
Importantly, wages continue to outpace inflation. In real terms, pay rose by 0.5% (CPIH measure), giving workers modest improvements in spending power.
What This Means for Recruiters
For the recruitment industry, February’s data suggests a market that is steady but cautious. Hiring volumes are subdued, yet vacancy levels are no longer falling sharply. With real wages improving and labour supply rising, 2026 may shape up to be a year of stabilisation rather than further slowdown.
Industrial action remains a factor, with 118,000 working days lost in December — mainly in health and social care — but overall, the labour market appears to be finding firmer ground.
Office for National Statistics (ONS), released 17 February 2026, ONS website, statistical bulletin, Labour market overview, UK: February 2026
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