UK Jobs Market Slows as Pay Rises Defy Hiring Slump

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Britain’s labour market is sending mixed signals at a critical economic moment. Hiring activity is slowing at its fastest pace this year, yet wages continue to climb, deepening the challenge for policymakers trying to tame inflation without stalling growth.

New data from job search platform Adzuna highlights how employers and workers are being pulled in opposite directions as tax changes, economic uncertainty, and monetary policy collide.

Hiring Activity Drops to New 2025 Low

The UK job market weakened sharply in November, according to Adzuna’s latest analysis of online job postings. Advertised vacancies fell 15.2% year-on-year, marking the steepest annual decline recorded so far in 2025.

Month-on-month figures tell a similar story. Job adverts declined 6.4% from October, extending a downturn that has now lasted five consecutive months. For recruiters and job seekers alike, the message is clear: employers are becoming increasingly cautious.

This sustained pullback suggests businesses are reassessing expansion plans amid rising costs and policy uncertainty, rather than responding to a short-term seasonal dip.

Tax Changes Weigh on Employer Confidence

One of the key drivers behind the slowdown is a shift in government policy. British employers began tightening hiring plans after higher social security contributions came into effect in April, following Chancellor Rachel Reeves’ first budget last year.

The increase raised employment costs at a time when many companies were already grappling with weak demand and higher financing expenses. As a result, firms particularly in cost-sensitive sectors, have opted to freeze recruitment or delay new roles.

Adding to the strain, concerns over potential tax increases in the chancellor’s second budget, delivered in late November, have further dampened business confidence. Employers appear reluctant to commit to long-term staffing decisions until there is greater clarity on fiscal policy.

Unemployment Climbs to Highest Level Since 2021

The cooling jobs market is now feeding through into official labour statistics. Britain’s unemployment rate rose to 5.1% in the three months to October, its highest level since 2021.

While the increase remains modest by historical standards, it marks a turning point after years of post-pandemic labour tightness. Economists see the rise as a sign that demand for workers is no longer keeping pace with population growth and labour supply.

For job seekers, especially younger workers and those switching careers, the market is becoming more competitive as fewer vacancies attract a growing number of applicants.

Wages Continue to Rise Despite Fewer Vacancies

In a development that complicates the economic picture, Adzuna reported that advertised salaries rose 7.7% year-on-year in November, accelerating slightly from October’s 7.3% increase.

The strongest pay growth was seen in technology and IT roles, where demand for specialised skills continues to outstrip supply. Only two sectors recorded a decline in advertised pay, underscoring how uneven the labour market has become.

This resilience in wages suggests that while companies are hiring less, they are still willing to pay a premium to secure experienced or hard-to-find talent, particularly in roles critical to productivity and digital transformation.

A Growing Dilemma for the Bank of England

The diverging trends in employment and pay leave the Bank of England (BoE) facing a difficult balancing act. Last week, the central bank cut interest rates in response to signs of a slowing economy.

However, policymakers also made clear they remain concerned about inflationary pressures, especially those linked to wage growth. Strong pay increases risk keeping services inflation elevated, even as overall economic momentum weakens.

Adzuna’s data underscores this tension. A softer jobs market would typically ease wage pressure, but persistent skills shortages and cost-of-living demands are preventing pay growth from cooling as quickly as expected.

Expert Perspective: A Market Losing Momentum, Not Collapsing

Labour market analysts caution against interpreting the data as a sudden crisis. Instead, they describe the current phase as a gradual loss of momentum rather than a sharp downturn.

According to Adzuna, employers are becoming more selective rather than retreating entirely. Companies are focusing on essential hires, offering competitive salaries for high-impact roles while trimming recruitment elsewhere.

This approach reflects broader economic uncertainty rather than panic. Businesses are waiting to see how fiscal policy, inflation trends, and interest rates evolve before committing to large-scale hiring again.

Sectoral Divide Becomes More Pronounced

The latest figures also reveal a widening gap between sectors. Technology, professional services, and specialised engineering roles continue to command strong pay growth, while retail, hospitality, and administrative roles face weaker demand.

This divide has implications for workforce mobility. Workers in declining sectors may struggle to transition without retraining, while fast-growing fields remain inaccessible to many without targeted skills development.

Economists warn that this imbalance could exacerbate inequality if wage growth becomes concentrated in a narrow set of professions.

What This Means for Workers and Employers

For workers, the message is mixed. Rising advertised pay offers some protection against the cost-of-living squeeze, but fewer vacancies mean job security and career progression could become harder to achieve.

For employers, higher wages combined with tax and contribution increases are squeezing margins. Many firms may respond by investing more in automation, productivity tools, or internal training rather than expanding headcount.

The coming months are likely to test how resilient businesses and households are to slower growth paired with stubbornly high costs.

A Fragile Equilibrium

Britain’s labour market now sits at a fragile crossroads. Hiring is slowing, unemployment is edging up, and yet wage pressures refuse to ease. This unusual combination leaves policymakers with limited room for error.

If economic growth continues to weaken, pressure will mount on the Bank of England to support demand. But as long as wages remain elevated, inflation risks will constrain how far interest rates can fall.

For now, the UK jobs market is not in freefall, but it is clearly losing balance. How government policy, monetary decisions, and business confidence align in early 2026 will determine whether this slowdown stabilises or deepens.

 

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