This morning has brought us up to date on the official data for the UK labour market and it remains a worrying picture. The most up to date numbers covering employment show another decline.
Payrolled employment decreased by 43,000 employees (0.1%) in December 2025, compared with November 2025; figures for December should be treated as provisional estimates and are likely to be revised when more data are received next month.
Care is needed with these figures because they exclude the self-employed but as I pointed out last Friday the Office for National Statistics is in quite a malaise and it looks as though the hoped for fix has moved further into the distance. So to some extent we use what figures we can.The tax or HMRC figures have been pretty consistent and not in a good way.
Early estimates for December 2025 indicate that the number of payrolled employees was 30.2 million, which is a fall of 0.6% from December 2024; this is equivalent to 184,000 fewer employees.
In terms of economics 101 there looks to be a relatively clear case of cause and effect as the increase in employment taxes in the Budget of October 2024 has been followed by lower employment. It also looks as though the rate of decline has accelerated.
When comparing the number of payrolled employees in November 2025 with the previous month, the number decreased by 0.1%. This shows no change from the early estimate of a 0.1% decrease reported in our previous bulletin,
I am not quite sure why they chose to switch to percentages rather than the numbers but we were previously told that the fall was 38,000.
Thus the picture on our most timely measure gives a very different impression to that provided by the latest monthly GDP release.
In the month to November 2025: Monthly GDP is estimated to have grown by 0.3%,
However it is much more in line with the ersatz quarterly numbers.
Real gross domestic product (GDP) grew by 0.1%, after showing no growth in the three months to October (revised up from a fall of 0.1% in our previous publication) and an unrevised growth of 0.1% in the three months to September 2025.
That is essentially flatlining once an allowance is made for the margin of error and that fits much better with falling payrolled employment than the single month of November.
If you want more detail then that too is troubling.
The largest increase was in the health and social work sector, with a rise of 37,000 employees; the largest decrease was in the wholesale and retail sector, with a fall of 72,000 employees.
Whilst the NHS is in an apparent permanent state of needing more resources and staff we have a hint of public-sector expansion and private-sector weakness which is a poor harbinger for the public finance figures due later this week.
Public-Sector pay is on a tear
The theme of an economy pivoting towards the public-sector got more reinforcement here.
Annual average regular earnings growth was 7.9% for the public sector and 3.6% for the private sector;
As you can see pay growth in the public-sector is more than double that in the private one.Also if we look further we see hat where pay growth is better in the private-sector it has a different consequence.
After the public sector, the wholesaling, retailing, hotels and restaurants sector showed the strongest regular annual growth rate.
The tax and HMRC figures we looked at earlier suggest that employment is falling in the private-sectors seeing fast wage growth whilst the health sector grows. Our official statisticians try to cover this off.
however, the public sector annual growth rate is affected by some public sector pay rises being paid earlier in 2025 than in 2024, causing a base effect which has now reached its peak and will phase out over the next three months.
The situation made me take a look and I am sorry to have to tell you that there appear to be problems with this series as well. An extreme example is a rise in in the index for public-sector pay from 225.4 last July to 239.5 in August. Now maybe that happened but a year ago the index was 234.4 and now it is 232.1 which last time I checked was a lower number. So the reported growth relies entirely on the seasonal adjustment being applied and we know this concept ( retail sales and GDP come to mind) has hit trouble elsewhere. As an aside the unadjusted numbers for November show that average public-sector pay at £730 per week is above the £717 of the private-sector.
If we now switch to the overall figures we see this.
Annual growth in employees’ average earnings was 4.5% for regular earnings (excluding bonuses) and 4.7% for total earnings (including bonuses).
Thar was very similar to what we were told last month and with inflation falling suggests an improvement in the position for real wages.
Using the Consumer Prices Index excluding owner occupiers’ housing costs (CPI) to adjust for inflation, annual growth in real terms was 0.9% for regular pay and 1.1% for total pay.
The government will welcome that but the Bank of England Governor less so as his policy of cutting interest-rates at every other meeting does not fit well with that. Anyway we have a little flicker of hope for the economy from real wages albeit that the trend does look lower. There are two factors here firstly the expected decline in public-sector pay growth and the weakness in payrolled employment. Care is needed though as there was a bounce back here this time around.
Early estimates for December 2025 indicate that median monthly pay increased by 4.0%, compared with December 2024.
I was right about inactivity
This is an area where the media and chattering classes got excited about, but I was much more sanguine. Let me take you back to the 18th of April 2023.
This does not mean that concerns over long-term sickness have disappeared but more that the scale of the problem may have been over emphasised. Perhaps it will spare the over 50s from more lectures from the Governor of the Bank of Engand implying that they should get back to work. After all they do not have the opportunity to reply that if he had done his job better everyone would be better off.
The chattering classes should of course have been nervous about the track record of the Governor of the Bank of England. But things have improved here.
The UK economic inactivity rate for people aged 16 to 64 years was estimated at 20.8% in September to November 2025. This is down in the latest quarter and below estimates of a year ago.
Comment
As I pointed out earlier there is some consistency between the latest employment figures and the rolling three-month figures for GDP. Flat growth and falling employment. The official survey or Labour Force Survey is more optimistic on employment but as I pointed out last Friday we are still waiting to see an answer to its problems.As we stand it gives a rather different answer to the payrolled employment numbers and the Workforce Jobs data. I am sorry to say that the way it fell into decline and the ongoing failure to fix it does not reflect well on the UK Statistics Authority and the Office for National Statistics.
Japan
Just a quick update to say that the Japanese Government Bond market has had another bad day.
