By Emeka Blast 
Job Market Weakens: UK Unemployment Hits 4.7%, Pay Growth Slows
The UK’s unemployment rate surged to 4.7% in the three months to May 2025, the highest since June 2021, while wage growth slowed to 5%, marking its lowest level in nearly three years, according to the Office for National Statistics (ONS). The figures, released on Thursday, highlight a weakening labour market, adding pressure on the Bank of England as it considers interest rate cuts at its August 7 meeting.
The jobless rate, up from 4.6% in the prior quarter, exceeded economists’ expectations of a steady 4.6%. The ONS reported a 41,000 drop in payrolled employees in May, with a revised estimate showing a less severe decline of 25,000 for the same month, compared to an earlier reported 109,000. Job vacancies fell by 56,000 to 727,000 in the April-to-June period, the lowest since April 2021, reflecting a 35th consecutive quarterly decline. The hospitality sector saw the largest job losses, shedding 108,000 roles over the past year, while health and social work added 67,000 jobs.
Average regular earnings growth, excluding bonuses, dropped to 5% from 5.3%, though it still outpaced June’s 3.6% inflation rate, yielding a real wage increase of 1.8%. Private sector pay growth fell to 4.9%, while public sector wages rose by 5.5%, buoyed by government pay awards. ONS director Liz McKeown noted, “The labour market continues to weaken, though revised tax data shows the decline is less pronounced than previously estimated.”
The figures come amid economic strain from Chancellor Rachel Reeves’ October 2024 budget, which raised employer National Insurance contributions (NICs) by £25 billion and increased the National Living Wage by 6.7% in April. Business leaders, including the CBI and major retailers like Asda (£100m hit) and Tesco (£1bn hit), warn that these measures are driving job cuts and price hikes. Shadow business spokesman Andrew Griffith called the rise in unemployment “unsurprising,” blaming Labour’s “jobs tax.”
However, Labour’s employment minister, Alison McGovern, highlighted that 384,000 jobs have been added since the July 2024 election, with real wages rising faster than under the previous Conservative government. Economists suggest the cooling labour market could pave the way for a Bank of England rate cut from 4.25% to 4% in August, though persistent wage growth concerns may temper expectations. Paul Dales of Capital Economics noted, “The reduction in headcounts should eventually weigh on inflation,” supporting gradual rate cuts to 3% by next year.
