Labour market outlook Q4 2025
Think tank: Resolution Foundation
Author(s): Nye Cominetti; Hannah Slaughter
December 15, 2025
This report from UK think tank the Resolution Foundation discusses the labour market outlook in the final quarter of 2025.
Employment has fallen over the past two years and is substantially lower than it was before the pandemic. Perhaps surprisingly given its central place in policy debates, participation is essentially unchanged compared to pre-pandemic: rising inactivity due to ill-health has been offset by long-term declines in family-related inactivity.
Instead, rising unemployment, rather than falling participation, is the counterpart to falling employment. Unemployment has increased steadily over the past year, consistent with sluggish GDP growth as well as increases in labour costs in 2025, in particular following the increase in employer National Insurance Contributions (NICs).
As is typical in economic downturns, young people have been hit hardest. With unemployment expected to stay elevated, Government should be cautious about any further increases in labour costs and should strengthen support for young jobseekers.
