This month’s labour market data indicates that employment levels are holding steady at 75% (Jan-March), but there are early warning signs of difficulties on the horizon, with provisional payroll data for April suggesting that the number of employees on payroll may have fallen. An uptick in the use of zero-hours contracts is also of concern. But an increasing number of those in economic inactivity report they want to work, potentially resulting in a mismatch between rising demand and the number and quality of opportunities available.

More people looking for work

On a more positive note, the rate of economic inactivity, meaning working-age people who are not in work and not looking for work, has fallen by 0.1 percentage point to 21.4% (9.2 million). Coupled with a simultaneous slight uptick in the unemployment rate to 4.5%, this suggests that people are moving from inactivity into active job seeking. Many of those who were inactive and now looking for jobs are people previously looking after family, temporarily sick, or early retirees.

Notably, the number of people who are inactive but say they do want a job has also increased markedly on the year to nearly two million. This is good news for Government ambitions to increase the labour market participation, but there are question marks over whether there are enough suitable jobs available for all those who need and want one.

The number of available job opportunities continues to decline

Vacancies have been on a long downward trend from the unusual peaks in 2022, and have now fallen below pre-pandemic levels. This may make it harder for those re-entering the workforce to find employment, particularly as businesses report their appetite for hiring is under pressure from the rise in the National Living Wage and National Minimum Wage, coupled with the increase in employer National Insurance Contribution. This recent rise in labour costs affects low paying businesses and sectors more than high-paying ones, such as those operating in retail, hospitality, services and social care.

Figure 1: Vacancies have fallen below pre-pandemic levels

Source: Work Foundation analysis using Office for National Statistics (13 may 2025). Dataset: A01, table 21: vacancies by industry, seasonally adjusted.

However, the increased costs are unlikely to be the sole reason for the fall in vacancies in a sector such as retail (30,000 since Jan-March 2020), but likely the result of wider changes in the sector, such as a shift to online shopping precipitated by the pandemic, and a move to greater in-store automation. Our previous research has shown that the retail sector has generally experienced a contraction in employment, while the share of insecure work has increased.

Rise in zero-hour contracts despite forthcoming Employment Rights Bill

Over the past year, the number of zero-hour contract workers has increased by 130,000, of which 81% are women. Women tend to be more likely than men to find themselves in severely insecure work, due to still bearing the brunt of (child)caring responsibilities and needing flexibility at work, which can be very hard to come by in more secure roles.

This months’ data belies the expectation that some employers would seek to reduce reliance on zero-hour contracts ahead of the implementation of the Employment Rights Bill, which would offer guaranteed hours to any zero-hour contract worker who had been with their employer for over 12 weeks. However, this is not likely to be implemented for another 18-24 months. At the same time, employers particularly in the lower paying sectors where zero-hour contracts are concentrated, report that their labour costs are increasing from April 2025 onwards. In that context it’s possible they may seek to use zero-hour contracts for as long as they can to balance out increasing costs.

Policy and reform: a disconnect?

This month’s data suggests a troubling mismatch. More people want to work, but the right jobs may not be available. Policymakers should monitor the continuing fall in job opportunities alongside other indicators of the health of the labour market, particularly given the recent policy emphasis on increasing labour market participation, and a sharp reduction in access to health-related benefits. Applying more ‘stick’ is unlikely to be an effective approach if the jobs simply aren’t there.

Furthermore, we need to look beyond the number of available jobs at the quality of jobs that are available. In order to support people back into work, particularly those with health challenges, it is key that work is secure, suitable and sustainable. Previous approaches have focussed getting people into ‘any job’, but pushing people into insecure or poor-quality roles, as there are worrying signs of with the uptick in zero hours contracts, could increase churn and worsen outcomes, risking a cycle that fails workers and employers alike.

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