Young people hit hard as UK unemployment marches upwards
When Labour came to power, it set a “long-term ambition” of increasing the employment rate – the share of the working age population with a job – to 80%,The latest data suggest things are moving in the wrong direction,The employment rate in the three months to October was 74,9%, according to the Office for National Statistics (ONS), down 0,3 percentage points on the quarter.
This shift was not driven by economic inactivity – a significant worry after the pandemic, as many people took early retirement or were unable to stay in work for health reasons – and was the focus of Labour’s Get Britain Working white paper last year.Instead, as Nye Cominetti, the principal economist at the Resolution Foundation thinktank, has said, the more immediate worry is the relentless rise in unemployment.According to the ONS’s labour force survey released on Tuesday, the unemployment rate in the three months to October rose to a four-year high of 5.1% – 0.8 percentage points higher than a year ago.
Inactivity has been drifting down – to 21%, 0.7 percentage points lower, and not out of line with the norm before Covid.Health-related inactivity remains crucially important – but is not driving the current deterioration in the jobs market.Young people have been hit particularly hard: the number of 18- to 24-year-olds out of work, at 546,000, is the highest since 2015 and up 85,000 on the quarter.“Young people again find themselves at the heart of this downturn, just as they were in the wake of the financial crisis and Covid.
Policymakers and employers need to redouble efforts to support them,” Cominetti said.Labour intends to equalise the minimum wage for younger workers with the adult rate, with another significant rise due in April, but some commentators, including the Resolution Foundation, have raised questions about whether that is the right step in the current climate.The ONS’s alternative, real-time indicators of the labour market – gathered from HMRC’s pay as you earn system – reveal an even more worrying employment picture.On this measure, the annual growth rate of payrolled jobs slipped into negative territory in March 2025 – just as Rachel Reeves’s employer national insurance increase and a chunky minimum wage rise were about to kick in – and has declined ever since.The early “flash estimate” for November suggests a loss of 0.
6% of payrolled jobs in the economy year on year – the fastest decline since the depths of the pandemic.The extended and chaotic run-in to Reeves’s late November budget, with relentless speculation about where tax rises might fall, seems unlikely to have helped.Of course, this continued slowdown in the jobs market brings with it softening wage growth – which should reassure the Bank of England as it prepares to consider cutting interest rates this week.Annual growth in regular pay was 4.6%, according to the ONS’s main series, down significantly from the 5.
9% in the final three months of 2024.The early real-time data suggests a much sharper decline, from an annual rate of 3.7% in September to just 2.7% in October.If Wednesday’s inflation data also reassures, that should open the way to the pre-Christmas cut in borrowing costs Reeves and her colleagues hope for.
But the accelerating downturn in the labour market appears likely to take over from inflation as one of the biggest headaches facing ministers in 2026.
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