UK Labour Market Rebounds Amid Economic Uncertainty

The UK labour market has been holding steady in recent weeks, despite a gloomy economic outlook, according to the latest data from Indeed. As of 14 February, UK job postings were 15% below their pre-pandemic baseline, with hiring demand treading water ahead of April’s policy changes.

While business sentiment remains downbeat, there are few signs of a broader uptick in the job market for now. After the traditional slowdown around the holidays, job postings saw a decent rebound in January, suggesting a degree of underlying resilience in hiring demand.

Despite stabilising, UK job postings continue to lag behind peer economies, including Australia, Canada, France, Germany, and the US, where job postings remain above pre-pandemic levels.

Businesses have voiced concerns about the negative employment consequences of April’s National Insurance hike and minimum wage rise, yet hiring pullbacks have not intensified. This trend aligns with official vacancies data, which indicates a recent stabilisation in hiring activity.

New year hiring rebound suggests strength 

Job postings typically dip over the holiday season before picking up in January as recruitment plans kick into gear. This year followed the same pattern, with postings recovering to early-December levels by early February, suggesting that businesses have stepped up recruitment efforts in the new year as usual.

Notably, the start of 2025 was firmer than the past few years, which is moderately encouraging, even though postings started from a low base. Some sectors saw a strong start to the year, with job postings rising in childcare, legal, and marketing, as well as public sector-driven categories like education & instruction and nursing.

Conversely, hiring was subdued in retail-related roles, with driving, loading & stocking, and retail job postings all declining well into the new year. Postings were also down in the personal care & home health and community & social service sectors.

Wage growth remains high

The latest official labour market figures showed strong wage growth at around 6% in December. That corresponds with the Indeed Wage Tracker, which signalled 6.1% year-on-year growth in posted wages as of January. 

Though it has dipped slightly from recent peaks, wage growth is still running at roughly double the level consistent with the Bank of England’s 2% inflation target, presenting a headache for monetary policymakers as it suggests businesses may need to raise prices. 

The annual pace of wage growth is also about twice as fast in the UK as it is in the US and Euro area. This rapid growth, while a challenge for policymakers, is good for workers trying to rebuild their purchasing power after a period of high inflation, who are seeing 3.4% annual real terms pay growth.

Redundancy notifications remain low despite warnings of job cuts

Despite warnings of planned job cuts, redundancy notifications have not seen a meaningful uptick. Employers with more than 20 redundancies planned are required to notify the government at least 30 days in advance, but so far, notifications have remained around their current levels.

Jack Kennedy, Senior Economist at Indeed, says: 

“The UK labour market has shown resilience at the start of the year, with job postings rebounding in January following the usual holiday slowdown. While hiring demand remains below pre-pandemic levels and economic uncertainty persists, the relative stability of job postings, continued modest redundancy notifications and robust wage growth indicate a labour market that certainly faces strong headwinds but hasn’t buckled thus far.

“The key question is whether the UK labour market can avoid a hard landing once April’s policy changes take effect,” Kennedy continues. “While hiring demand has been somewhat resilient to date despite the challenging outlook, businesses may need to adjust workforce strategies as cost pressures mount.”

HRD Connect Curators of the New Business Landscape. HRD Connect produces industry-recognized content for senior HR leaders. Through articles, case studies, Q&As, podcasts, events, and more, we offer truly progressive and cutting-edge insights designed to help people leaders address core HR challenges and add greater value to their business.

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