UK Labour Market March 2026 + Reactions

UK Labour Market March 2026

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

"Today's figures show there are 388,000 more people in work than there was this time last year. While this is encouraging, we know there is more to do to get people, particularly young people, into work.

"That's why we're investing £2.5 billion to create up to 500,000 opportunities for young people to earn or learn, transform the welfare state into a working state – including a new £3,000 Youth Jobs Grant for businesses who take on eligible young people and expanding the Jobs Guarantee to cover 18- to 24-year-olds.

"We're also delivering the biggest reforms to apprenticeships in a decade - giving employers more flexibility and expanding foundation apprenticeships into the hospitality and retail sectors."

Background:

• Over the past 12 months there are 388,000 more people in work. This has outpaced the increase in unemployment (up 323,000) over the same period. We've done this by encouraging investment, supporting key industries, and making it easier for businesses to hire.
• The UK's employment rate is in the top half of OECD economies and is above the G7 average (of 73.1%). The UK's unemployment rate remains relatively low by international standards, in the bottom half of the OECD and lower than Canada, France, Italy and the Euro Area average.
• The inactivity rate (20.7%) has fallen to its lowest since Dec-Feb 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 (Jan 2026) is at 1.69m – down 38,000 this year. The claimant unemployment rate was 4.4%.
• The Secretary of State for Work & Pensions this week outlined a major employment drive to reverse rising number of young people neither earning nor learning with an additional £1 billion to be invested in grants to help unlock over 200,000 paid jobs for young people, with Jobs Guarantee to be expanded to ages 18-24 and new foundation apprenticeships in hospitality and retail. Major employment drive to help unlock 200,000 new jobs and apprenticeships for next generation - GOV.UK
• 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.
• The Department for Work & Pensions has announced the expansion of its Pathfinders scheme to Nottingham and three areas across North East England following significant early successes seen through the scheme, marking the latest step in the nationwide rollout of the government's Get Britain Working plan.

British Chambers of Commerce

Reacting to the latest labour market data from the ONS, David Bharier, Head of Research at the British Chambers of Commerce, said:    

“With unemployment at 5.2% for the quarter, and expectations it will continue to rise, there are clear signs that pressure is growing on the labour market. Our latest forecast expects it to climb to 5.5% this year.  

“Three major factors could shape the outlook: high and rising labour costs, the proliferation of AI, and growing uncertainty caused by the conflict in Iran.   

“Labour costs remain the biggest cost pressure for businesses, cited by 72% in our latest quarterly survey. Last year saw a significant increase in employment NICs, and firms now face additional regulatory pressures as the Employment Rights Act comes into force.    

“Targeted initiatives such as the Jobs Guarantee and Youth Jobs Grant show the government recognises the risks, but for many firms the basic barrier is the overall cost of employment.  

“Our latest research, released today, shows that most SMEs are not looking to decrease headcount as a direct result of AI. But a smaller group, of around one in ten SMEs, with deeper AI integration are more likely to expect workforce reductions in the coming months. This could add to unemployment over time.  

“At the same time, the conflict in Iran is set to drive higher inflation and weaker growth, raising the risk of stagflation if it is not resolved quickly.”   

More detail on the labour market data can be found here.  

Institute of Directors

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 shows stagnation in employer demand for labour, with unemployment steady at 5.2% and a slight decrease in vacancies in the latest quarter.

“UK businesses are experiencing a cost of employment crisis, exacerbated by the Employment Rights Act, increased employer National Insurance Contributions, and several years of above-inflation minimum wage increases. The cost pressures arising from the conflict in the Middle East are also set to place an additional strain on employers, many of whom may look to employment as an area to make savings.

“This week's announcements on youth unemployment contained some welcome steps to encourage employers to hire young people. However, if the government is serious about tackling the increase in unemployment, particularly youth unemployment, it must take a more pragmatic approach to employment reform.

“Specifically, we are calling on the UK government to adopt the following changes to its implementation of the Employment Rights Act:

1. Exempt employers with fewer than 100 employees from trade union access provisions.
2. Increase the planned reference period for the entitlement to guaranteed hours to 52 weeks.
3. Reintroduce the Statutory Sick Pay rebate for SMEs.
4. Adjust implementation dates to give employers more time to prepare for the most complex reforms, including changes to protection against unfair dismissal and trade union access to workplaces.

“Without these changes, businesses will remain constrained in their ability to hire, risking further increases in unemployment.”

TUC

• Overall employment rose by 0.2% to 75.1%.

• The unemployment rate was up 0.1% to 5.2% while inactivity fell 0.3% to 20.7% into the latest three month.

• Payroll employment has risen in each of the last three months by 32,000 overall.

• Youth unemployment is up to 14.5%, although youth inactivity remains down over the year from 32.3% to 29.7 %.

• Vacancies were little changed at 721,000.

• Nominal pay growth slowed to 3.9 per cent in the latest month.

• Real pay growth is 0.6% against CPI inflation, down from 3.1% in the same period last year.

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

“The jobs market was stabilising before Trump's illegal war – but now the international picture threatens to make things worse. The longer this war goes on, the greater the threat to households and firms.

“Government support so far has been welcome, but if the economy is further hit by Trump's illegal war workers will need more help. Ministers must keep doing everything they can to support workers – especially those young people who were let down so badly by the Conservatives.

“The government was right to expand the Jobs Guarantee to more young people and encourage businesses to hire those who have been out of work for more than six months. Early experience of good paid work makes a huge difference to young people's prospects across their lifetimes. But the number of places should now be further expanded and young people shouldn't have to wait until they have been unemployed for 18 months to access support."

On interest rates, Paul added:

“The labour market remains subdued, and real wage growth has slowed again. The Bank of England should stay on track with planned rate cuts to make it easier for households to spend and firms to invest." 

ENDS

Notes to editors:

- TUC research on consumer demand: 

https://www.theguardian.com/business/2026/feb/16/bank-of-england-should-cut-rates-to-boost-consumer-spending-says-tuc