span>span>Thursday 17th July 2025/span>span> - 11:22 (BST)/span>/span>
The UK’s unemployment rate unexpectedly climbed to 4.7% in the three months to May 2025, sharply up from April’s 2.6% and well above market expectations. This marks the highest level since the summer of 2021 and underscores growing strains in the labour market. The rise was broad-based, with increases in short-term, medium-term, and long-term unemployment both on a quarterly and annual basis.
Paradoxically, total employment also rose during the period, increasing by 134,000 to 34.13 million—the highest since February. Gains were registered in both full-time and part-time positions, and the proportion of workers holding second jobs edged up to 3.9%. Meanwhile, the economic inactivity rate fell by 0.3 percentage points to 21%, suggesting some re-entry into the labour force, although not enough to offset the rise in joblessness.
Wage growth showed signs of cooling, with regular pay excluding bonuses rising 5% year-on-year to £677 per week. While slightly ahead of forecasts, this was the slowest pace in nearly three years and comes after an upwardly revised 5.3% rise in the previous quarter. The moderation in earnings may signal easing inflationary pressures, but it also points to a more cautious outlook from employers.
Sterling came under pressure following the data release, as investors recalibrated expectations for Bank of England policy. The unexpected surge in unemployment is likely to amplify concerns about the sustainability of the UK’s economic recovery, potentially strengthening the case for interest rate cuts later in the year. A softening labour market, combined with cooling wage growth, could weigh on GBP in the near term.
