Today's ONS figures paint a concerning picture of the UK labour market. Whilst the data shows more people are trying to enter the workforce, the conditions which await them are challenging. Growth in vacancies and private sector wages remains sluggish, and unemployment is rising. For disabled and young jobseekers, conditions are worsening faster.

The labour market is weakening

Job vacancies and private sector pay growth suggest subdued labour demand from employers. The total number of job vacancies for October-December 2025 stood at 726,000, a decrease of 73,000 on the year.

Meanwhile, the positive headline that nominal annual pay growth is a historically strong 4.2% hides a more mixed picture on wages. Whilst public sector wages are up by 7.2% on the year, the ONS notes this likely reflects pay increases awarded earlier in 2025 than in previous years. Private sector pay growth has slowed to 3.4%, its lowest rate since the height of the pandemic in October 2020. With inflation remaining above 3%, the reality is many private sector workers have seen little tangible improvements to their living standards in the last year.

Unemployment is rising as more people become economically active

Unemployment has risen to 5.2%, its highest level in nearly five years. The number of people unemployed and searching for work has risen by 331,000 over the past year to 1.88 million, the fastest annual increase in unemployment in the G7.

Figure 1: Percentage of adults aged 16+ who are unemployed

Source: ONS dataset A01: Table 1 People by economic activity for those aged 16 and over (seasonally adjusted), October-December 2020 to October-December 2025

This rise in unemployment is driven, however, by people moving from economic inactivity into actively searching for work. Overall levels of economic activity have risen by around 0.7 percentage points, representing 712,000 people entering the labour market. Conversely, the number of economically inactive people aged 16-64 reduced on the year by 145,000. The largest rise in participation was from those who were previously inactive due to caring responsibilities.

Whilst in a strong labour market rising participation would be taken as an unequivocally good sign, the current context is more problematic. People now looking for work face an increasingly competitive jobs market, and the risk is many may struggle to find work, instead facing the prospect of a period of prolonged unemployment. Unemployment can affect people’s health in numerous ways, and longer durations of unemployment are likely to worsen the extent of those issues.

Disabled and young people face a particularly competitive labour market

The current labour market is a particularly tough environment for groups of workers who have traditionally faced structural inequalities in work, such as disabled or younger workers.

Disabled people are now twice as likely to be unemployed than non-disabled people (4.4%). This means one in eleven disabled people are unemployed (9.2%), the highest rate for over six years. Since the same quarter last year, the ‘gap’ between unemployment rates for disabled and non-disabled workers has increased by 1.3 percentage points.

Figure 2: Table showing annual rise in unemployment rate for disabled people and non-disabled people (2024 - 2025)

Source: Work Foundation estimates using ONS dataset A08: Economic activity of people with disabilities aged 16-64: rates, UK

The widening gap indicates that disabled workers are disproportionately affected by the current weakening of the UK labour market. This is likely due to structural barriers for disabled workers, including limited access to flexible work, inadequate workplace adjustments and insufficient tailored employment support.

Youth unemployment now stands at 14.0%, the highest for nearly five years. Yet more worryingly over the course of 2025 around one in five unemployed young people had been unemployed for over 12 months, an increase on the previous year.* This type of long-run unemployment early in a persons’ working life can result in lifelong decreased earnings and higher unemployment risks in the future, a phenomenon known as ‘scarring’. Long-term youth unemployment today risks creating future problems for the next generation of workers.

Choppy waters ahead

Labour market data illustrates that the Government faces an unenviable balancing act. They are currently undertaking several small-scale trials around employment support including employment ‘trailblazers’ - place-based support programmes focused on young people and employment inactivity - and jobs on wheels – a mobile services bringing opportunities directly to communities. These activities may identify mechanisms to address structural inequalities as well as support more people into healthier work, tackling long-running issues of health-related inactivity.

Yet finding the perfect mix to support people into long-term, secure and sustainable work may take many trials of different schemes. With conditions in the labour market weakening and structural inequalities widening, the Government may not have the luxury of prolonged pilots. In the coming year, policymakers will need to test their mettle between speed, scale, and precision in employment support to ensure growing unemployment doesn’t transform into long-term unemployment.

* Figure derived from ONS dataset A01: Table 9 Unemployment by age and duration: People (seasonally adjusted). The average % of unemployed workers aged 18-24 between Nov-Jan 2025 and Oct-Dec 2025 (inclusive) was 22.1%. For Nov-Jan 2024 to Oct-Dec 2024 the average was 18.4%.

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