In a speech to the Bank of England Watchers Conference, Deputy Governor Clare Lombardelli described the current UK labour market as being in "low gear" – cooling primarily through weaker hiring rather than an increase in job losses. She noted that the unemployment rate, which was below 4% in 2022, rose to a peak above 5% late last year and now stands at 4.7% for the three months to August.
The rise in unemployment has been steady but modest. From mid‐2024 to the end of 2025, unemployment increased for six consecutive quarters, adding roughly one percentage point in total before the most recent data showed a slight decline, leaving the rate broadly stable around 5% in the Bank’s November central projection.
Labour‐market flow data reveal that redundancies have stayed roughly at pre‐pandemic levels, indicating that the slowdown is not driven by large‐scale layoffs. Instead, vacancies have fallen well below their pre‐pandemic level, and the REC measure of labour demand remains contractionary, signalling that firms are adjusting mainly by reducing new‐hire demand.
Job mobility has also weakened over the longer term. In 2025, almost three million workers switched jobs – about one in twelve of those employed – while overall movements between jobs have declined, limiting the economy’s ability to reallocate labour efficiently.
Despite the weaker hiring, the Bank assesses that underlying wage growth remains at the upper end of the range consistent with its inflation target, and forward‐looking indicators suggest wage pressure may persist into next year. The combination of low‐hire dynamics and reduced mobility raises concerns for productivity, young‐worker entry, and the economy’s capacity to adapt to technological change.