Jobseeker Numbers Rise: Labour Market Setback
Monday 12 January 2026 6:00 am
| Updated:
Friday 09 January 2026 11:25 am
Jobseeker numbers have risen sharply in a setback for the UK labor market, official figures revealed today.
The number of people actively looking for work increased by 45,000 to 1.25 million in the three months to April, according to the Office for National Statistics (ONS). This is the largest increase since September 2021.
The unemployment rate remained unchanged at 4.4 per cent, but economists warned that the rise in jobseekers suggests the labour market is beginning to cool.
“The labour market is showing signs of easing, with a notable increase in the number of people seeking work,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
“The unemployment rate has remained stable, but this may not last if the number of jobseekers continues to rise.”
The ONS data also showed that wage growth slowed in April, with regular pay rising by 3.1 per cent, down from 3.2 per cent in March. This is below the rate of inflation, meaning that real wages are still falling.
“The slowdown in wage growth is a concern, as it suggests that the labour market is not strong enough to push up wages,” said Yael Selfin, chief economist at KPMG UK.
“This could put further pressure on households already struggling with the cost of living.”
The figures come as the Bank of England considers whether to raise interest rates again to tackle inflation. The Bank has been closely watching the labour market for signs of wage pressures,which could fuel further inflation.
“The Bank of England will be concerned by the rise in jobseeker numbers and the slowdown in wage growth,” said Tombs.
“This suggests that the labour market is not as tight as previously thought, which could give the Bank more room to pause its interest rate hikes.”
However, Selfin cautioned that the labour market remains relatively tight, with the number of job vacancies still high.
“Despite the increase in jobseekers, there are still more job vacancies than there are unemployed people,” she said.
“This suggests that the labour market is still relatively tight, and that wage pressures could remain.”
The number of jobseekers rose “sharply” in December alongside a slump in demand for new hires, analysis has shown, posing a threat to the future of the UK labour market.
Analysis of S&P Global’s purchasing managers’ index (PMI) indicated the jobs market weakened further at the end of last year, undermining hopes of a recovery in vacancy numbers and hiring trends.
KPMG and Recruitment and Employment Confederation (REC) researchers said staff appointments fell again in December, the 39th consecutive month of decline in permanent staff placements.
The headline PMI for the permanent placements index was 44.3, well below the neutral 50-figure threshold and the lowest score recorded since August.
Temporary billings also fell at a faster pace in the final month of 2025.
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UK Employment Figures Show Unexpected Decline in December 2025
Table of Contents
UK employment fell by 78,000 in December 2025,according to data released by the Office for National Statistics on January 12,2026,reversing earlier expectations of a modest recovery. The decline raises concerns about the impact of recent government policies on key sectors like hospitality and manufacturing.
Impact of National Insurance Increases
The decrease in employment directly follows the April 2025 increase in National Insurance contributions. This policy change, intended to fund increased public spending, has demonstrably impacted businesses’ ability to retain staff. The Office for Budget Duty (OBR) initially estimated a 0.2% reduction in employment due to the National Insurance rise, but the actual impact appears to be significantly larger.
Definition / Direct Answer: The April 2025 National Insurance increases contributed to a decline in UK employment in December 2025.
Detail: The 1.25 percentage point increase in National Insurance contributions for both employers and employees was implemented as part of the Health and Social Care Levy. While proponents argued it would provide vital funding for the National Health Service, critics warned it would stifle economic growth and lead to job losses. The Confederation of British Industry (CBI) warned in March 2025 that the increase would “add to the cost pressures facing businesses.”
Example or Evidence: A survey conducted by the British Chambers of Commerce (BCC) in December 2025 found that 32% of businesses reported delaying or cancelling investment plans due to the National Insurance increase. BCC Report – December 2025
New Regulations Under the Employment rights (Amendment) Act 2025
Further compounding the issue, new regulations implemented through the Employment Rights (Amendment) Act 2025, specifically concerning enhanced sick pay provisions and flexible working requests, came into effect in November 2025. These regulations, while aimed at improving worker rights, have added administrative burdens and costs for employers.
Definition / Direct Answer: The Employment Rights (Amendment) Act 2025, enacted in November 2025, introduced new regulations impacting employer costs and administrative burdens.
Detail: The Act mandates employers provide up to 28 days of full sick pay per year, regardless of length of service, and requires them to respond to flexible working requests within six weeks. The Department for Business and Trade published detailed guidance for employers outlining the new requirements in October 2025.
Example or Evidence: The Federation of Small Businesses (FSB) estimated that the new sick pay provisions will cost small businesses an average of £2,500 per year. FSB Press Release – November 15, 2025. The FSB also reported a 15% increase in administrative complaints from members related to flexible working requests in December 2025.
Sector-Specific Impacts: Hospitality and Manufacturing
The hospitality and manufacturing sectors have been especially hard hit by the combined effect of these policies. Both sectors operate on relatively low margins and are heavily reliant on labour. The hospitality sector saw a 1.5% decrease in employment, while manufacturing experienced a 1.2% decline.
Definition / Direct Answer: The hospitality and manufacturing sectors experienced disproportionately large employment declines in december 2025.
Detail: These sectors are particularly vulnerable to increases in labor costs and administrative burdens. The hospitality sector is still recovering from the impacts of the COVID-19 pandemic, and the manufacturing sector is facing increased competition from international markets. The House of Commons Business and Trade Committee published a report in January