The UK unemployment rate has risen to 4.7% in the three months to May 2025—its highest level since June 2021—according to data released by the Office for National Statistics (ONS).
This is up from 4.6% in the previous three-month period.
At the same time, wage growth has slowed significantly. Regular pay (excluding bonuses) rose by 5% in the same period, the weakest increase in nearly three years and down from a revised 5.3% in the three months to April. Despite this slowdown, wage growth continues to outpace inflation, with real wages rising by 1.8% when adjusted for the Consumer Prices Index.
ONS director of economic statistics Liz McKeown noted:
“The labour market continues to weaken, with the number of employees on payroll falling again, though revised tax data shows the decline in recent months is less pronounced than previously estimated.”
She added that pay growth has declined both in cash terms and real terms, though it remains strong compared to historical levels.
Vacancies also declined, dropping by 56,000 to 727,000 in the three months to June—continuing a three-year downward trend in job openings.
The unemployment increase was steeper than economists had expected, as most forecasts anticipated the rate would hold steady at 4.6%. Conversely, wage growth was slightly better than the expected 4.9%.
These figures arrive amid broader economic challenges. The UK economy contracted in both April and May, and firms are under pressure from higher national insurance contributions and an increase in the national minimum wage introduced in April. Uncertainty has also been heightened by international developments, including a new tariff regime launched by U.S. President Donald Trump, which has fueled global trade tensions.
Earlier this week, Bank of England Governor Andrew Bailey signaled that the Bank is open to making larger interest rate cuts if the labour market shows sustained weakness. Photo by Phil Whitehouse, Wikimedia commons.
