(UK) — The Office for National Statistics reported the UK unemployment rate rose to 5.2% in the three months to December 2025, while youth joblessness climbed to 16.1%, putting extra strain on entry-level hiring and wage bargaining.
The data showed a labour market that continued to soften into the end of 2025, a shift employers and workers watch closely as companies set staffing plans and households weigh spending against still-high costs.
For migration-linked employment, the same backdrop matters because international students and many work visa applicants depend on employer demand, especially in sectors that hire large numbers of new entrants.
Total unemployment rose by 94,000 to 1.883 million people, the figures showed, as the job market cooled after a long stretch of tight conditions.
Among 18-24-year-olds, the number out of work jumped by 80,000 on the quarter to 575,000, underlining how youth unemployment is worsening faster than the overall rate.
The scale of longer-duration joblessness has also become a focus. Nearly 40% of unemployed young people aged 18-24 have been unemployed for more than 6 months, and 1 in 4 young men seeking work have been unemployed for more than a year.
Those duration measures matter because they can shape early careers, delaying the first full-time role for school leavers and new graduates and raising the bar for entry-level positions.
Employers often treat junior roles as easier to pause during uncertainty, and the latest numbers suggest new labour market entrants now face tougher competition for the same openings.
Graduate pathways can narrow in that environment, including for international students whose plans depend on moving from study into work and then into employer-sponsored roles.
The Office for National Statistics data also pointed to a broader set of signals that employers use to gauge labour demand, including employment, inactivity, payroll trends and vacancies.
The employment rate decreased to 75.0% in October to December 2025, while economic inactivity fell slightly to 20.8%, the figures showed.
A small drop in inactivity can support labour supply, but it can also complicate the picture because people shift between categories as they look for work, study, or manage health and caring responsibilities.
Payrolled employment has fallen for 10 of the last 14 months, with retail and hospitality experiencing the largest contractions, the data showed.
Those two sectors together had over 120,000 fewer jobs compared to January 2025, a pullback that tends to hit students and younger workers early because they are heavily represented in front-line and part-time roles.
Retail and wholesale also saw the largest fall in payroll employment, losing approximately 65,000 jobs over the past year, according to the official figures.
Vacancies have become a central part of the story because they signal how many job openings exist for people moving into work, and they help shape bargaining power in pay talks.
The unemployment-to-vacancy ratio stood at 2.6 unemployed people per vacancy, the highest outside the pandemic in 10 years, the figures showed.
When including economically inactive people who want to work, the ratio reached 5.4 people per vacancy, highlighting a wider pool of potential workers than the headline unemployment measure captures.
A higher ratio can mean longer job searches and fewer choices for applicants, and it can also push employers to become more selective in screening as they receive more applications per role.
That can feed through to the practical experience of job seekers, including recent graduates applying for the first professional role and migrants competing for positions that come with sponsorship.
The data also showed wage growth moderated while still running ahead of inflation. Average annual wage growth slowed to 4.2%, down from 4.4% in the previous quarter, while inflation stood at 3.4%.
Slower pay growth can ease pressure on employer costs, but it also affects household budgets, especially for renters and lower-paid workers who spend a larger share of income on essentials.
The wage and inflation mix also feeds into expectations for the Bank of England’s next moves on interest rates, because policymakers watch pay trends for signs that inflation pressures may persist.
Some economists suggested cooling wage pressures could influence the next decision by the Bank of England on interest rates, while the data also said moderating pay growth strengthens the case for interest rate cuts.
A March rate reduction is considered increasingly likely, the data said, tying the labour market picture to borrowing costs that influence business investment and consumer-facing demand.
For sectors that rely on discretionary spending, any perception of slower growth can weigh on hiring, even if rate cuts later reduce financing costs for firms and households.
The labour market shift has also widened differences between sectors, with some areas adding jobs even as others shed roles.
Health and social work added approximately 39,000 positions over the year, providing a counterbalance to losses elsewhere.
That resilience matters for migration-linked employment because health and care roles often sit within established visa-linked hiring routes, while also reflecting ongoing demand for services.
By contrast, the pressure in retail and hospitality can tighten the entry points that many people use to gain initial UK work experience, including students seeking part-time roles and graduates taking stepping-stone jobs.
Analysts also warned that entry-level demand can weaken for administrative roles when firms slow expansion, because those positions tend to track wider hiring plans and office growth.
Employers across sectors are in “wait-and-see mode,” reluctant to expand their workforce amid higher payroll costs, fragile business confidence, and persistent uncertainty around growth, the analysis said.
Businesses have cited increased employment costs, including higher employer National Insurance contributions and minimum wage adjustments, as factors slowing hiring.
The policy changes were introduced in recent budgets under Chancellor Rachel Reeves, putting the debate over employer costs at the centre of how quickly hiring might recover.
Political leaders have also debated the causes of rising unemployment, and the response has included a focus on youth joblessness.
Pat McFadden, Work and Pensions Secretary, emphasized the government’s focus on tackling youth unemployment and expanding apprenticeships.
Helen Whately criticized recent fiscal decisions, arguing they have increased employer risk in hiring young workers.
Daisy Cooper called for targeted tax relief for hospitality businesses, a sector facing job losses.
Those disputes matter for employers weighing recruitment because shifts in policy signals can affect business confidence, staffing budgets, and the willingness to invest in training for junior roles.
Apprenticeships sit in the middle of that discussion because they blend hiring with structured training, and they can act as an alternative path into work when graduate and entry-level vacancies shrink.
For international students and migrants, the policy direction also matters because employer-sponsored visa routes depend heavily on business hiring confidence.
The sector split also shapes where migrants and students look for work, because demand remains stronger in some fields than others.
Healthcare remains one of the more stable employment sectors for migrant workers under the UK’s Skilled Worker framework, the analysis said.
For international students on Graduate or Student visas hoping to transition into employer-sponsored roles, increased competition for entry-level positions could lengthen job searches, the analysis said.
That pressure can rise even for well-qualified applicants when fewer employers run large graduate intakes or when firms replace permanent roles with temporary or contract staffing.
For migrants targeting sponsored roles, a softer market can change how employers hire, with more emphasis on experience, clear job fit, and roles that are harder to fill domestically.
The same environment can also shift wage bargaining, because more applicants per vacancy can reduce pressure on employers to raise offers quickly, even if labour shortages persist in specific occupations.
Analysts also pointed to growing investment in artificial intelligence as a potential long-term factor reshaping the job market, especially for roles that involve routine tasks.
Entry-level administrative and retail roles may face automation pressures, the analysis said, which intersects with weaker entry-level demand during a cooling market.
When employers invest in new systems, they may redesign jobs rather than simply replacing people, but the analysis said the areas most exposed include tasks that can be automated or standardised.
That can push job seekers to show clearer evidence of applied skills, including digital skills and role-specific experience, because screening can become stricter when more candidates chase fewer entry points.
For students and new graduates, internships during study programs can become more important as a signal to employers, the analysis said, especially when the market becomes more competitive.
The latest labour market figures also prompted wider comparisons beyond the UK.
Stephen Evans, chief executive at Learning and Work Institute, noted that youth unemployment is now at its highest rate in five years, with the OECD highlighting that Britain’s youth unemployment rate has risen above the European average for the first time since records began in 2000.
The Work Foundation analysis also indicated the UK has the fastest annual increase in unemployment in the G7.
Looking into 2026, the same indicators that drove the latest snapshot will remain central to how employers and workers judge momentum, including labour market releases, vacancies, wage growth and Bank of England decisions.
A softer market can extend job-search timelines in practical terms, because applicants may need to apply for more roles and wait longer for responses as employers slow decision-making.
As UK unemployment rises, sponsorship selectivity can also change because firms facing cost pressures may become more selective in offering Skilled Worker visa sponsorship, the analysis said.
The overall picture still differs sharply by sector, and the ONS figures showed hiring conditions do not move evenly across the economy.
Unemployment remains well below historic crisis levels, the analysis said, but the upward trend, especially among young people, points to structural pressure that can leave longer-term marks on early careers.
For migrants and international students, the bottom line from the latest figures is that opportunities persist, but competition increases, and sector choice matters as employers stay in “wait-and-see mode.”
Office for National Statistics Shows UK Unemployment Rises as Youth Jobless Rate Hits Decade High
UK unemployment reached 5.2% in late 2025, driven by a cooling labor market and rising youth joblessness at 16.1%. While healthcare shows resilience, retail and hospitality have lost over 120,000 jobs. High vacancy ratios and rising employer costs have made recruitment more selective, particularly affecting international students and migrants seeking sponsored roles as the UK’s unemployment growth now leads the G7.
