01 Jun 2026Credit Strategy, Shard Financial Media
Official figures reveal a 5% unemployment rate, declining job vacancies, and slowing wage growth, with youth hit hardest as sectors like retail and hospitality reduce hiring in the face of economic and geopolitical uncertainty.
Credit Strategy
UK unemployment climbs as payrolls suffer sharpest fall since pandemic
Britain’s labour market has weakened more sharply than economists expected, with official figures showing unemployment rising to 5 per cent in the three months to March and the number of available roles falling to a five-year low. The Office for National Statistics also estimated that payroll employment dropped by 100,000 in April, taking the total to 30.2 million, in a fall the agency said was the largest monthly decline since May 2020.
Retail and hospitality bear the brunt of jobs slowdown
The downturn has been especially pronounced in retail and hospitality, where firms have cut both hiring and headcount amid what the ONS described as “economic and geopolitical uncertainty”. Vacancies in retail fell by 7,000 quarter on quarter in the three months to April, while hospitality lost 11,000. Over the same period, payroll numbers were estimated to be 76,000 lower in retail and 75,000 lower in hospitality than a year earlier.
Vacancies continue multi-year decline as hiring demand weakens
The weakness comes after a long period of easing demand for workers. The ONS said vacancies had fallen for yet another quarter, extending a multi-month slide that has left openings far below their post-pandemic peak, though still above pre-Covid levels. Separate ONS releases published over the past year showed repeated quarterly declines in vacancies, including falls to 898,000 in February to April 2024 and 884,000 in May to July 2024, before the latest drop to 705,000 in the three months to April 2025.
Wage growth loses steam amid cooling labour market
Pay growth also lost momentum. Regular earnings rose by 3.4 per cent in the first quarter, down from 3.6 per cent in the previous three months and barely ahead of consumer price inflation. The cooling in wages, combined with weaker hiring, suggests the labour market is no longer acting as a strong buffer for household finances.
Youth unemployment reaches highest level in a decade
Younger workers have been hit hardest. The unemployment rate for 16- to 24-year-olds climbed to 16.2 per cent, the highest since 2015, underscoring how closely youth employment is tied to sectors now under pressure. Work and pensions secretary Pat McFadden said there were still 416,000 more people in work than a year earlier, but acknowledged that the conflict in the Middle East was casting a shadow over the jobs market.
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