This month’s statistics show a sluggish labour market, marked by growing unemployment and too few job opportunities. Although Government aims to raise the employment rate to 80%, we have only seen a slow rise from 74.8% to 75.1% on the year, and early indicators for payroll employees suggest that this number might be declining.

Work Foundation analysis indicates that there are 3.86 million working age people (16-64) out of work who would want a job, including 1.8 million active job seekers and nearly 2.1 million who are economically inactive but do want to work. This means 35.7% of working aged people currently outside of employment want a job.

Figure 1: Working-age workless who want to work (jobseekers and inactive who want a job)

Source: Work Foundation estimates using ONS dataset A01: Table 1: Labour Force Survey Summary: People by economic activity for those aged from 16 to 64 (seasonally adjusted) & Table 11 Economic inactivity: People aged 16 to 64 by reasons for inactivity (seasonally adjusted).

The drivers of rising unemployment: people rejoining the labour market and a challenging hiring landscape

Part of the rise in unemployment is due to people leaving inactivity and joining the search for work, including those who were previously in full time education, or those who were looking after their family/home. Overall, the number of economically inactive people fell by 94,000 on the quarter and by 286,000 on the year. Some jobseekers are clearly successfully finding work - the employment level went up by 65,000 on the quarter and 350,000 on the year. However, there is some evidence that finding a job is getting increasingly challenging, particularly for young workers, due to a lack of suitable job opportunities.

Vacancies increased marginally on the quarter by 9,000 job postings but remain 85,000 below pre-pandemic figures. The recent slight uptick may reflect that businesses are becoming less cautious than they were in the run up to the Autumn Budget in 2025. However, it is important to note the overall figures reflect a challenging landscape for hiring, which is largely driven by a difficult global market, tariffs, and changes in consumer demand.

Figure 2: Vacancies remain below pre-pandemic levels

Source: Work Foundation estimates using ONS dataset A01: Table 21: Vacancies by industry (seasonally adjusted), October-December 2018 to October-December 2025.

Continued challenges for young people

This quarter saw an increase in unemployment of 80,000 among 18–24-year-olds on the quarter, taking it up to 561,000. This reflects a rise in short-term unemployment (less than six months) and is likely driven to some extent by people leaving education and starting to look for work. It is important that the trends among this group are monitored, as the risks of long-term employment for young workers are particularly great, with time out of the labour market potentially harming their future careers. For example, people who experience unemployment at an early age can have a higher likelihood of experiencing repeated spells of worklessness and persistent lower wages over the course of their working lives.

Opportunity for the Government to tailor support to those who are economically inactive but do want, and expect to work

An important question for policymakers looking to raise the employment rate is how likely is it that those people who are currently economically inactive but state they want a job, will actually seek work and be able to sustain it in the future?

Digging beneath the headlines, we conducted additional analysis of the labour market using Labour Force Survey microdata (July-September 2025). We looked specifically at people’s expectation that ‘they will work in the future’ and found that those who indicated they did want work were 1.9 times more likely to say they ‘definitely’ or ‘probably’ expected to work in the future (67%), compared with 35.7% of those who did not want to work.

Expectation functions as a proxy for intention – in other words, when people expect they will ‘definitely’ or ‘probably’ work in the future, they intend to undertake steps to make this happen. There is, therefore, a real opportunity for policymakers to identify and support this group of people to prepare, and access opportunities in the labour market.

Figure 3: Expectations of working in the future, by economically inactive who do, or do not want to work

Source: Work Foundation analysis of ONS Labour Force Survey microdata, July-September 2025. Accessed through the UK Data Service SN: 9480.

Government’s to do list in 2026

The Government will be, rightly, wary of asking employers to do more at a time of rising costs and relatively fragile confidence. But there are levers it can pull to incentivise employers to create jobs and hire workers, while ensuring that these jobs represent good quality, secure opportunities.

To make progress towards achieving an 80% employment rate, Ministers should focus interventions on the group of inactive people who want, and who expect to work, in the future. That means further de-risking their pathways into work, providing additional tailored employment support, and targeting incentives for employers to hire in those sectors identified for future growth in the Industrial Strategy.

And of course, the type of jobs created matters too. It’s key that any incentives for business are connected to the creation of jobs that are secure, flexible and sustainable for the future.

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