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New figures from the UK’s Office for National Statistics indicate a continued softening in the British labour market, with unemployment rising and wage growth easing again, particularly affecting younger workers.

The unemployment rate increased to 5.1% in the three months to October, up from 5% in the previous period. This marks the highest level recorded in almost five years. When the unusual conditions of the pandemic period are excluded, it represents the highest unemployment rate since early 2016, highlighting the depth of the current slowdown.

Wage growth has also lost momentum. Average regular earnings rose by 4.6% in the three months to October, slipping back from 4.7% in the preceding quarter. Once inflation, measured by the Consumer Prices Index, is taken into account, real wage growth stood at 0.9%. While pay continues to rise in nominal terms, the pace has moderated, which may limit improvements in household purchasing power.

Further evidence of weakening conditions can be seen in payroll data. The number of employees on company payrolls fell by an estimated 38,000 in November, bringing the total to 30.3 million. This decline points to cautious hiring behaviour among employers and reduced confidence about future demand.

The ONS noted that younger workers are facing particular challenges in the current environment. Reduced recruitment activity tends to affect those at earlier stages of their careers more sharply, as entry-level roles and short-term contracts are often the first to be cut back when conditions tighten.

Commenting on the data, Liz McKeown, Director of Economic Statistics at the ONS, said the overall picture remains one of a labour market losing momentum. She highlighted that falling payroll numbers, flat vacancies and rising unemployment together suggest subdued hiring activity across the economy. The concentration of these effects among younger age groups underlines the uneven impact of the slowdown.

For businesses and advisers, these developments raise important questions around workforce planning, wage expectations and recruitment strategy. For individuals, particularly younger workers, the figures point to a more competitive jobs market where skills development and flexibility may become increasingly important.

Disclaimer: This article is based on publicly available information and is intended for general guidance only. While every effort has been made to ensure accuracy at the time of publication, details may change and errors may occur. This content does not constitute financial, legal or professional advice. Readers should seek appropriate professional guidance before making decisions. Neither the publisher nor the authors accept liability for any loss arising from reliance on this material.