Labour Market statistics + reactions

Labour market overview, UK: January 2026

Estimates of employment, unemployment, economic inactivity and other employment-related statistics for the UK.

Secretary of State for Work and Pensions, Pat McFadden, said:

"Today's figures show there are 513,000 more people in work compared to this time last year, but also highlights why we must go further, especially for our young people.

"That's why are investing £1.5 billion to get hundreds of thousands of young people earning or learning, while former Health Secretary Alan Milburn is leading a review to help us get to the root of what is holding the younger generation back.

“Through our Jobs Guarantee launching this month we are helping young people find paid work placements, and we urge employers to come forward and join the likes of EON, JD Sports, Tesco and TUI who are already pledging their support.”

Background:

• In 2025, there were 440,000 more people in work. This has outpaced the increase in unemployment (up 288,000) over the same period. We've done this by encouraging investment, supporting key industries, and making it easier for businesses to hire.
• The inactivity rate (20.8%) has fallen to its lowest level in since Jan-Mar 2020.
• Unemployment is a historic issue, with the unemployment rate rising since July 2022, and has risen in other G7 countries.
• Since July 2024, real wages have grown more under this government than the first ten years of the last government.
• The number of people claiming unemployment benefits is falling. The claimant count (Dec 2025.) is at 1.68m – down 43,000 this year. The claimant unemployment rate was 4.4%.
• The unemployment rate has risen on the quarter and year to 5.1%.
• Alan Milburn is leading an investigation into the causes of soaring unemployment in the young and has set out his ambition to inspire a ‘Movement' to galvanise communities in all corners of the country. Alan Milburn calls for a 'movement' to address lost generation of young people not earning or learning
• We want to incentivise businesses to back young talent – which is why we're offering relief on National Insurance contributions for employing anyone aged under 21 – and the Treasury has extended this scheme for another year.
• Since the election, there have been six interest rate cuts and the Budget will reduce inflation by up to 0.5% this year helping the Bank of England to cut interest rates further, lowering business costs and giving them the confidence to invest.
• We have secured private investment worth over £250bn since July, supporting 45,000 jobs, created the National Wealth Fund, which has already invested £3.8bn to support 20,300 jobs and we have kept corporation tax at the lowest rate in the G7. 

Jobs Guarantee:

Government to guarantee paid jobs for long-term unemployed young people under new national scheme

• The Government will open applications later this month for delivery partners for the new Jobs Guarantee, offering fully subsidised paid work placements for 18-21-year-olds who have been out of work for 18 months.
• The scheme is designed to tackle rising youth unemployment, matching and supporting young people into local jobs and helping them take their first step into sustained work.
• 66 employers have already signalled a desire to take part including TUI, B&M, KFC, JD Group, Gym Group, Home Bargains and Leonardo Hotels.
• The Secretary of State for Work & Pensions, Pat McFadden has said the scheme will help boost employment and prevent a generation of young people becoming trapped on benefits.  
• An initial rollout will see more than 1,000 young people placed into jobs across England, Scotland and Wales ahead of a national expansion.
• Employers will receive full wage subsidies with additional funding for delivery partners providing training and wraparound support to prepare young people for the workplace.

TUC

• The unemployment rate rose by 0.3 percentage points to 5.1% into the last quarter, employment was unchanged at 75.1% and inactivity is down 0.2 to 20.8%
• Payrolls fell by 184,000 on the year to December
• Youth unemployment is up to 13.7%, its highest rate in 5 years. Youth inactivity is down from 32.8% to 29.7% compared to same quarter last year
• Vacancies rose a little to 734,000
• Real pay growth is 0.6% against CPI inflation, down from 2.5% in the same period last year.

Commenting on the latest labour market figures, TUC General Secretary Paul Nowak said:

“It's no surprise that after months of sluggish growth, the economic slowdown is acting as a drag on the labour market.

“But as the economy strengthens, the jobs market will follow – that's why getting money in people's pockets and protecting living standards is essential to securing a strong recovery.

“The government must continue to do all it can to tackle the affordability crisis. Meanwhile the Bank of England needs to go further and faster on interest rate cuts this year – making it easier for firms to invest and households to spend.

“Young people who are out of work must get the help they need. Experience of real work is best way to help young people who are starting out. The new jobs guarantee can be a major step forward for those who cannot find work in the open labour market – but more places are urgently needed.

“Young people also need good secure jobs with decent prospects, including notice of their shifts and sick pay when they're ill. This kind of security allows people to move into and stay in jobs rather than cycling between insecure zero hours work and unemployment. That's why the Employment Rights Act is so important.”

IoD

Responding to the latest ONS labour market data, Alex Hall-Chen, Principal Policy Advisor for Employment at the Institute of Directors, said:

“Today's data is evidence of a further weakening labour market, with the number of payrolled employees falling by 0.1% on the month, unemployment up 0.3pps on the quarter, and vacancies flatlining.

“These figures reflect the cumulative impact of historically low levels of business confidence and the government's employment policies over the past year: increasing employer's National Insurance Contributions, above-inflation increases to the National Living Wage, and the Employment Rights Act have all severely dampened employer demand for labour.

“The government's compromise on additional protections against unfair dismissal was a welcome sign of willingness to listen to the concerns of the business community, but more needs to be done. An IoD survey over 500 business leaders in December 2025 found that 57% cited a significant scaling back of employment reforms as key to boosting business confidence. It is therefore imperative that government uses secondary legislation to make the Employment Rights Act more workable and less damaging for employers, for example by exempting SMEs from trade union access provisions.

“Without such compromises, the government's ambition to promote growth and increase employment has little hope of success.”

Full Results

532 responses from across the UK, conducted between 19-31 December 2025. 12% ran large businesses (250+ people), 19% medium (50-249), 27% small (10-49 people), 31% micro (2-9 people) and 11% sole trader and self-employed business entities (0-1 people).

Throughout 2025, business confidence in UK economic prospects has stood at historically depressed levels. Which of the following would do most to boost business confidence in 2026? Please choose up to three.

British Chambers of Commerce

Reacting to the latest labour market data from the ONS published this morning, Patrick Milnes, Head of People and Work Policy at the British Chambers of Commerce, said:  

“The latest data indicates businesses are still not feeling confident about taking on more staff or expanding their operations  

“The rate of unemployment has held steady at 5.1% and the number of pay-rolled employees has continued tofall, suggesting the labour market is still loosening.  

“Wage increases, including bonuses, held steady at 4.7%, providing little relief for businesses who have seen eye-watering growth in employment costs, and know there is still more pain to come.  

“With above inflation rises in the minimum and living wage due in April, and a raft of costs associated with new employment legislation, employers will continue to hold back.  

“Our most recent survey found that labour costs continue to be the main cost pressure they face, cited by 72% of firms. 

“The data also point to a rise in industrial action with an estimated 155,000 working days lost because of labour disputes across the UK in November 2025. This is the highest number of working days lost since January 2024.   

“Added to this we now have fresh uncertainty emerging around tariffs and businesses will be looking to government for clear signs that it understands the difficulties they face. 

“This means it is vital that this is the year of delivery for the Industrial, Trade and Infrastructure strategies announced in 2025.”