The latest data from the Office for National Statistics (ONS) has revealed a mixed picture for the UK employment market as of January 2025, reflecting ongoing challenges in both employment levels and vacancy numbers.
Employment and unemployment rates
The UK employment rate for individuals aged 16 to 64 was estimated at 75.5% for the period between September and November 2024. This represents a slight decline of 0.2 percentage points compared to the previous quarter, highlighting a modest contraction in workforce participation. Meanwhile, the unemployment rate rose marginally to 4.4%, up from 4.3% in the previous quarter, indicating emerging strains in the labour market.
Economic inactivity among those aged 16 to 64 also edged higher, reaching 20.8%, a 0.1 percentage point increase from the previous period. These shifts suggest a growing segment of the population is either unable or unwilling to engage in employment, presenting potential long-term challenges for the labour market. The redundancy rate also reached a five-month high this month, at 3.8%, reflecting the continued pressure on employers to manage workforce costs in a challenging economic environment.
Vacancy data
Vacancy numbers in the UK have continued to decline, with an estimated 812,000 vacancies recorded between October and December 2024. This marks a drop of 24,000 from the previous quarter and represents the lowest vacancy level in over three years. These figures point to a more cautious hiring landscape as employers navigate ongoing economic uncertainties.
January marks the 30th consecutive monthly decline in UK vacancies, highlighting the ongoing impact of more cautious hiring practices across sectors. Despite the slowdown in hiring activity, average weekly earnings rose by 5.6% year-on-year, reaching a six-month high. With inflation subdued, this has translated into real-terms wage growth, offering a degree of respite for households facing cost-of-living pressures.
Juxtaposing the declining vacancy numbers, the private sector regular pay growth rose to 6% in this period, far exceeding the BoE’s forecast of 4.8%, and underscoring the competitive market for retaining top talent.
Global market news
Beyond the UK, the global employment landscape offers both opportunities and challenges:
- US trends: US markets remain resilient, supported by strong performances in the technology sector and resilient economic data. However, the announcement of 25% tariffs on imports from Mexico and Canada by the new US administration has introduced volatility in global trade and currency markets.
- Europe’s industrial decline: Data from Eurostat reveals a 2.2% year-on-year drop in industrial production across the eurozone, underlining persistent struggles within the region’s manufacturing sector.
- Asia-Pacific trade: China’s pivotal role in Asian trade remains undiminished, with S&P Global Ratings highlighting its stable share of global markets over the past decade.
Opportunities for leadership and innovation
The figures from the latest month underscore the importance of agile leadership and innovative workforce strategies to navigate current challenges. With vacancy levels falling but wage growth outpacing inflation, businesses have a unique opportunity to attract and retain top talent by focusing on competitive remuneration, flexible work options, and robust employee engagement initiatives.
Jo Matkin, CEO at TALiNT Partners comments “The UK hiring market shows no short-term signs of recovery, with vacancy rates in their 12th quarter of decline, and the full effects of the Autumn Budget as yet unrealised. As economic uncertainty prompts employers in certain sectors to consider or accelerate alternative ways of getting work done, the jury’s out on whether the return to a buoyant market will come soon, or at all.
For those in employment, the picture is more positive, with a return to real-terms wage growth, but with impending ERNI increases on the horizon, more muted wage growth in some sectors is potentially on the way and will need to be balanced with the imperative to retain talent. The more systemic issue of decreasing labour force participation could present an opportunity for innovative employers prepared to invest in alternative and flexible ways to engage at least a proportion of this growing group.”
