UK Jobless Rate Climbs to 5% Amid Weakening Labour Market

According to new government figures, the unemployment rate in the UK rose to 5% in the three months to September, indicating a weakening job market.

sarah

Nov 11, 2025 - 19:21

UK Jobless Rate Climbs to 5% Amid Weakening Labour Market

The Office for National Statistics (ONS) said this is the highest rate since the period from December 2020 to February 2021 – increasing expectations of an interest rate cut in December.

The rise in the unemployment rate was higher than expected, exceeding the 4.9% forecast by many analysts ahead of the budget on November 26.

Average wage growth in the third quarter was 4.6%, down from 4.7% in the three months to August.

While the unemployment figure is bad news for the government, it has fueled speculation of an interest rate cut at the Bank of England's Monetary Policy Committee meeting on December 18.

Danny Hewson, head of financial analysis at AJ Bell, said expectations of a cut have risen sharply, but "no one is taking anything for granted until we see the full details of the Chancellor's plans."

The UK's central bank expects unemployment to remain around 5% in the coming years.

Liz McKeown, director of economic statistics at the ONS, said: "Overall, these figures point to a weakening labour market.

"Meanwhile, the unemployment rate has reached its highest post-pandemic level in the latest quarter." However, the number of job vacancies has remained broadly unchanged."

Excluding the elevated levels seen during the Covid-19 years, Tuesday's unemployment rate was the highest since August 2016.

The ONS said the figure should be treated with caution and that it is taking further steps to address concerns about the quality of the data.

Work and Pensions Secretary, Pat McFadden, acknowledged that "there are challenges in the labour market" but insisted that "the British economy is still creating jobs."

He said he was "concerned by the increase" in the number of young people not in employment or training over the past five years.

Shadow Work and Pensions Secretary Helen Whately blamed the increased unemployment on government policies that were "taxing jobs, increasing red tape on businesses, and undermining confidence in the economy".

An initial estimate suggested the number of people on company payrolls fell by 180,000 in the year to October, a 0.6% drop. This was more than expected.

Recruitment plans 'put on hold'

ONS data shows that around 1.7 million people are claiming unemployment benefits, slightly down on the figure a year earlier.

Job vacancies saw a slight increase, rising by 2,000 to 723,000 between August and October 2025 compared with the previous quarter – the first increase in more than three years – although the number remains significantly lower than the peak of 1.3 million recorded between March and May 2022.

The figures also showed that public sector wage growth was 6.6%, while in the private sector it was 4.2%.

Yael Selfin, chief economist at KPMG UK, said public sector wage growth was "nearing its peak" as the large pay increases of the past year were not expected to continue due to pressure on government budgets. No.

He added that wage growth in the private sector is "expected to fall further as more people look for work in the labor market, weakening workers' bargaining power."

Richard Carter, head of fixed income research at Quilter Cheviot, said that with two weeks to go until the budget, "many businesses will have put any major recruitment plans on hold."

"Having already faced significant increases in National Insurance costs at the start of the year, they will probably," he said, "be hesitant to make any real commitments until they know what further costs they are going to face."

Tina McKenzie, policy chair of the Federation of Small Businesses, said the rise in unemployment and fall in the number of people on payrolls showed the government's "cavalier attitude towards jobs and businesses."

She said small businesses were being deterred from hiring staff by "ever-increasing regulation, litigation and taxes," and appealed to Rachel Reeves to "take steps to support jobs and growth."

Which taxes could rise in the budget? Wage growth slowed slightly over the summer

State pension likely to rise by 4.7% in April