This morning has brought what is a very disappointing UK Labour Market report and it feeds straight back to what I wrote on Ocyober 31st last year in response to the Budget.
As you can see this is both contractionary ( fewer jobs) and inflationary.
It is hard not to think of the rise in employers National Insurance today and we can start with our most up to date employment measure.
The early estimate of payrolled employees for November 2025 decreased by 171,000 (0.6%) on the year, and by 38,000 (0.1%) on the month, to 30.3 million…..Estimates for payrolled employees in the UK fell by 149,000 (0.5%) between October 2024 and October 2025 and decreased by 22,000 (0.1%) between September 2025 and October 2025.
So a bad October looks like it has been followed by a November that is worse. The official figures for payrolled employment give a similar picture.
When looking at August to October 2025, the period comparable with our Labour Force Survey (LFS) estimates, the number of payrolled employees fell by 113,000 (0.4%) over the year, and by 24,000 (0.1%) over the quarter.
These numbers are for employees only and even the Office for National Statistics has more confidence in the tax based HMRC figures.
Our view remains that RTI provides the most reliable measure of employees and has shown a fall in 8 of the last 12 months.
If we switch to the official series we get the same bass line.
In August to October 2025, the estimated UK employment rate decreased by 0.3 percentage points to 74.9%;
However that must be mostly due to changes in the workforce size because employment according to this reading only fell by 16,000 this quarter and things get more awkward in the detail.
In the latest quarter (August to October 2025) the decrease in employment was because of decreases in the number of full-time workers. Over the year since August to October 2024, we have seen increases in both the number of employees and those self-employed part-time workers but decreases in the numbers of self-employed full-time workers.
This is because the official Labour Force Survey or LFS has a rise of 448,000 over the past year. This would be welcome if true but this is the survey that led to a parliamentary inquiry due to the obvious problems and in spite of the official claims to the contrary it does not look to have improved that much.
The achieved sample, including imputed cases (the dataset size), has increased from 74,186 individuals in April to June 2025, to 75,757 individuals in July to September 2025.
Whilst any improvement is welcome it is marginal and the use of the word imputed makes me nervous.
There is another official survey called Workforce Jobs or WFJ that we have looked at before and is considered more reliable. It’s only weakness is that it is quarterly.
The estimated number of workforce jobs in the UK was 36.6 million in September 2025. This is a decrease of 116,000 (0.3%) from June 2025, with decreases of 15,000 (0.0%) in the employee jobs component and 120,000 (2.9%) in the self-employment jobs component. Over the year, the estimated number of workforce jobs was down by 115,000 (0.3%) caused by a decrease of 201,000 (4.7%) in the self-employment jobs component.
As you can see the WFJ shows a quarterly fall that has turned the annual figures also negative and extrapolating the trend suggests the present quarter will be grim. In terms of its detail the falls in self-employment are what my friends and contacts have been telling me as firms cut back on various types of outsourcing.
Wages
If one is looking for weakness here the official series misses it although there is a nuance I will come to.
Annual growth in employees’ average earnings was 4.6% for regular earnings (excluding bonuses) and 4.7% for total earnings (including bonuses).
Whereas the more up to date tax numbers do show a turn lower.
Early estimates for November 2025 indicate that median monthly pay was £2,543, an increase of 2.7% compared with the same period of the previous year.
As you can see that looks rather weak and is below current inflation. We do get a little detail.
Annual growth in median pay in November 2025 was highest in the wholesale and retail sector, with an increase of 6.2%; it was lowest in the education sector, with a decrease of 3.3%.
The overall figure here has seen a sharp fall over the past couple of months meaning that the annual rate of increase has more than halved.
Public Sector Boom
By contrast this area is doing really rather well. Employment is rising.
Employment in the public sector was estimated at 6.18 million in September 2025, an increase of 7,000 (0.1%) compared with June 2025, and an increase of 62,000 (1.0%) compared with September 2024.
They also have received large pay rises as you can see below.
Annual average total earnings growth was 7.7% for the public sector in August to October 2025. This is up on the previous three-month period, when it was 6.8%, and is being affected by a base effect. Annual average total earnings growth was 4.0% for the private sector, which is down on the previous three-month period (4.4%). It was last lower than 4.0% in January to March 2021, when it was 3.9%.
If we just consider this in terms of the wages picture we see that we have something of a dichotomy underlying the official series.
Annual real total pay growth (using CPI) was 1.0% in August to October 2025, which is slightly down on the previous three-month period (1.1%). It was last lower than 1.0% in May to July 2023, when it was 0.6%.
Underlying this is strong public-sector real wage growth and effectively flat private-sector wage growth. Looking ahead a few days that looks rather ominous for the numbers for the public finances with spending affected by higher public-sector employment and wages whereas the private sector is struggling.
In fact bureaucracy is on the rise it would appear.
Employment in central government was a record high at an estimated 4.05 million in September 2025, an increase of 5,000 (0.1%) compared with June 2025 and an increase of 72,000 (1.8%) compared with September 2024; the main contributors to this increase were some local authority schools becoming academies, and the Civil Service.
The consequences of that seem to have surprised the Prime Minister.
Keir Starmer: “As Prime Minister, every time I go to pull a lever, there are a whole bunch of regulations, consultations, arms-length bodies that mean the action from pulling the lever to delivery is longer than I think it ought to be” ( Mark Wallace)
Pump up the housing market
Yesterday the UK state responded in a time-honoured way.
First-time buyers and the self-employed could get a step-up onto the housing ladder, under new plans from the FCA.
The regulator is keen to be seen to act.
- First-time buyers & underserved consumers: Simplifying mortgage rules to allow more flexible products that reflect different working patterns and income levels at different stages of life.
It is hard not to think of the “Liar Loans” of the past as you read that. Also as they have no control over mortgage rates how will they make them more affordable?
David Geale, executive director for payments and digital finance, said: ‘We have worked at pace this year to improve outcomes for customers wanting a mortgage. We’ll use insight from consumers and industry to drive further reforms and rebalance risk – helping to widen access to affordable mortgages to meet the needs of consumers today.
If you play buzz word bingo you will be busy as you read that!
Anyway it was hard not to have a wry smile as the news was released in time for this.
Average new seller asking prices fall by 1.8% (-£6,695) this month to £358,138. This larger than usual December drop means that prices are 0.6% (-£2,059) lower at the end of 2025 than in 2024, (Rightmove)
Comment
The UK labour market is behaving exactly in line with economics 101. If you raise taxes on jobs you get lower employment. Also we are seeing public-sector growth as the private sector weakens. On the other side of the coin we seem unable to produce more houses if the construction figures are any guide. But it looks as though the FCA is tilling the ground to do this for house prices.
Pump up the volume
Pump up the volume
Pump up the volume
Dance! dance!
I expect the Bank of England will also have a go on Thursday. The only problem is that this is one of the ways we got into our present economic malaise.
