Fresh official data has painted a concerning picture of the UK labour market, with wage growth slowing further and unemployment persisting at its highest level in almost five years.
Key Figures Show Cooling Labour Market
The Office for National Statistics (ONS) reported that average regular earnings growth, excluding bonuses, eased to 4.5% in the three months leading up to November. This marks a slight dip from the 4.6% recorded in the prior quarter and represents the weakest pace of growth since April 2022.
When adjusted for inflation using the Consumer Prices Index, real wages showed a modest increase of 0.9% over the same period.
Simultaneously, the UK unemployment rate remained static at 5.1% for the latest three-month period, maintaining its position as the highest rate seen in close to five years. In a worrying sign for December, the estimated number of employees on payrolls fell by 43,000.
Retail and Hospitality Bear the Brunt
The data reveals that the downturn in payroll employment is not evenly spread across the economy. The retail and hospitality sectors have been disproportionately affected, registering some of the most significant declines in staff numbers over the past year.
Liz McKeown, Director of Economic Statistics at the ONS, commented on the trend, stating: “The number of employees on payroll has fallen again, with reductions over the last year concentrated in retail and hospitality, and reflecting ongoing weak hiring activity.”
Vacancies Flatline as Pay Growth Diverges
While there was a minor uptick in job vacancies in the most recent period, the ONS noted that the total number has stayed broadly unchanged over the last six months, following a prolonged period of decline.
A notable split has emerged in wage growth between the public and private sectors. Private sector wage growth has decelerated to its lowest rate in five years. In contrast, public sector wage growth remains elevated, a situation the ONS attributes to the continued impact of some pay awards being implemented earlier than they were in the previous year.
This latest snapshot, released on Tuesday 20 January 2026, underscores the persistent challenges facing key parts of the UK economy, with consumer-facing industries like retail and hospitality experiencing the deepest job woes.
