The ONS has reported in the latest wages and employment data including UK jobs figures this morning. These data show unemployment has remained steady at 4.4% but job vacancies have fallen to their lowest level for almost four years.
The UK jobs market has reached a critical juncture, with the number of job vacancies in the three months to March 2025 dipping below pre-pandemic levels for the first time since COVID-19 measures were in place. Financial advisers are being urged to monitor developments closely, as rising costs, economic uncertainty, and shifting policy landscapes create headwinds for businesses and investors alike.
According to Danni Hewson, Head of Financial Analysis at AJ Bell, this moment represents a symbolic shift:
“For 33 months now vacancy numbers have been slipping back like sand falling through an hourglass… The last remnants of a post-pandemic boom that helped the UK stay resilient… have finally ended.”
The data, released by the ONS, revealed that vacancies dropped for the 33rd consecutive quarter—down 26,000 between January and March 2025. Payrolled employee numbers also slipped by 8,000 between January and February, with early estimates for March suggesting a sharper fall of 78,000 on the month.
These figures coincide with the rollout of higher employer National Insurance contributions and increases to the National Living Wage. Hewson noted that businesses likely took staffing decisions ahead of these changes, but cautioned that the full effect of last year’s Budget “won’t be really understood for several more months.”
A labour market under pressure
The accuracy of recent ONS labour force data has come under increasing scrutiny, a concern echoed by Lindsay James, Investment Strategist at Quilter:
“Concerns around the accuracy of the data make these labour market updates considerably less trustworthy than in previous cycles. Unfortunately… for now there is no alternative.”
Despite these reservations, current indicators suggest a softening jobs market, with the unemployment rate holding at 4.4%. While regular pay remains robust—up 5.9% between December and February—this continues to outpace inflation, which was 2.8% over the same period.
James added that the high wage growth, combined with stagnant productivity and growing employer costs, could spell trouble for job creation:
“Rising payroll costs are making job creation increasingly less attractive… and the extreme levels of economic uncertainty are leading to companies holding off on hiring.”
Wage growth: blessing or burden?
Wage growth remains a focal point in the economic debate. Luke Bartholomew, Deputy Chief Economist at Aberdeen, noted that pay increases are moderating but warned the rise in the National Living Wage could disrupt that trend. Still, he sees little reason for the Bank of England to delay an expected rate cut in May.
Derrick Dunne, CEO of YOU Asset Management, sees wage growth as a rare bright spot saying:
“Persistently rising wages are certainly positive… But it won’t assuage any consternation in the minds of rate setters, as wage rises continue to outstrip inflation.”
Despite the optimism, markets remain cautious. As Hewson put it, “Markets are betting that concern about the path of global economic growth will trump any lingering inflation jitters.” With tariff tensions and a fragile global outlook, advisers may need to prepare clients for more volatility ahead.
Workforce health and productivity strains
Beyond wages and vacancies, structural issues in the labour market are also causing concern. Julia Turney, Partner at BW, highlights the strain on workforce health and the growing cost burden on employers:
“Nearly half of UK workers have taken extended sick leave in the past five years… With economic inactivity stuck at sustained highs, the picture for workplace productivity is increasingly bleak.”
She advocates for smarter use of workforce data to identify risks and support employee wellbeing, which in turn could safeguard long-term business resilience without drastic cost-cutting measures.
What this means for advisers
With the UK teetering between resilience and retrenchment, the jobs data presents a mixed bag for advisers and their clients. Slower hiring and economic uncertainty could impact consumer confidence and corporate profitability. But persistent wage growth and expected rate cuts may offer a glimmer of stability in the medium term.
Financial advisers should keep a close watch on upcoming inflation figures, rate decisions, and global economic developments. As Turney suggests, leveraging data for proactive decision-making—whether in financial planning or workforce strategy—will be key to navigating what lies ahead.
