Labour Market Data Analysis Response by REC in May 2025
UK Jobs Market Shows Slow Growth Amidst Economic Challenges, as Amendments to Employment Rights Bill Aim to Boost Confidence
In the second half of 2025, the UK jobs market is experiencing a period of slow growth, marked by weakening labour demand, a decrease in vacancies, but continued moderate wage growth. Employer concerns, centred on affordability of wage increases and reduced hiring appetite amidst broader economic uncertainty and rising employment costs, have led to a lack of momentum in the market.
Recent data suggests that UK job vacancies have fallen for 37 consecutive periods, totalling 718,000 vacancies in May-July 2025. This represents a decrease of 5.8% that quarter and is significantly below pre-pandemic levels, with job postings 22.2% below February 2020 levels [1][2][3]. Many firms are not recruiting or replacing workers as employer confidence declines due to economic pressures.
The employment rate for ages 16-64 increased slightly to 75.3% in Q2 2025, but the unemployment rate rose slightly to 4.7%, higher than last year. Economic inactivity declined to 21.0%, indicating more people are engaged or seeking work [2][4]. The average earnings growth remains positive and robust, with nominal pay increases around 5.0%, and real earnings growth (adjusted for inflation) modestly positive but slowing, reflecting wage growth becoming less affordable for employers [1][2][3].
In an effort to address these concerns and boost employer confidence in the job market, the government has proposed amendments to the Employment Rights Bill, currently being discussed in Parliament. The Minister has highlighted the need for increased worker availability and business investment, stating that addressing these needs is essential to achieve the government's employment goal of 80% employment [5].
The proposed amendments aim to address employers' fears and encourage hiring by reducing bureaucracy for firms in complying with the Bill. By easing employers' nerves about entering the job market, the amendments could potentially boost employer confidence and contribute to a more dynamic labour market [6].
The labor market is considered crucial for driving productivity and economic growth. As the discussions on the Employment Rights Bill continue, the jobs market outlook in 2025 points to continuing slow labour demand growth, cautious employer hiring, slightly stronger wage growth but with pressures on affordability, and mixed labour market engagement trends. The employment rights landscape appears stable but may require further monitoring for potential future legislative impact.
[1] ONS (Office for National Statistics), UK labour market: May 2025 - Official Statistics [2] Resolution Foundation, UK jobs market: May 2025 - Analysis [3] CIPD (Chartered Institute of Personnel and Development), Labour Market Outlook: Summer 2025 - Report [4] ONS, Labour Market Statistics: August 2025 - Official Statistics [5] HM Government, Minister's statement on employment targets - Press Release [6] HM Government, Proposed amendments to the Employment Rights Bill - Policy Document
- Given the slow growth in the UK jobs market and the decrease in vacancies, there is a need for the government to address employers' concerns, especially those regarding affordability of wage increases and reduced hiring appetite, by considering measures that may be included in the Employment Rights Bill, such as reducing bureaucracy, to boost business confidence and encourage hiring.
- The ongoing discussions surrounding the Employment Rights Bill, a critical piece of legislation aimed at boosting employment, provide an opportunity for addressing the structural issues in the UK labour market, such as weakening labour demand and cautious employer hiring, ultimately contributing to a more dynamic and productive economy.
