UK Labour Market Softens as Wages Stagnate and Unemployment Rises
The UK labour market is facing a challenging period, with a recent report by the Resolution Foundation revealing that wages are stagnating and unemployment is on the rise. As of December 2025, the unemployment rate has reached 5.1%, its highest level since the Covid pandemic. This upward trend is a cause for concern, with real pay packets levelling off and job numbers falling.
Weak Pay Growth and Rising Unemployment
According to the think tank, the labour market is softening, leading to weakened pay growth. Over the past 12 months, average weekly earnings, excluding bonuses, have increased by a mere £3.80. This minimal growth is a significant departure from previous years, highlighting the need for policymakers to reassess their strategies. Hannah Slaughter, Senior Economist at the Resolution Foundation, emphasized the gravity of the situation, stating that “the labour market is ending the year with a whimper, with falling job numbers and weakening wage growth.”
The consequences of this trend are far-reaching, with Britain likely to enter 2026 with rising unemployment and the risk of shrinking pay packets. The government must prioritize addressing the burgeoning unemployment challenge and focus on supporting job creation. As Slaughter noted, “policy makers need to react to these trends” and take proactive measures to mitigate the effects of a softening labour market.
Expert Insights and Recommendations
The Resolution Foundation’s report serves as a timely reminder of the need for informed policy decisions. By examining the data and expert analysis, policymakers can develop targeted strategies to stimulate job growth and support workers. As the UK navigates this challenging period, it is essential to prioritize evidence-based decision-making and collaborative efforts to address the complex issues facing the labour market.
For more information on the UK labour market and the Resolution Foundation’s report, visit Here
