Wages flatline and unemployment rises as jobs market softens

23 Dec 2025

A report carried out by the Resolution Foundation has found that the UK labour market is softening whilst wages stagnate and unemployment rises.

Unemployment has reached 5.1% and real pay packets are levelling off, the Resolution Foundation said. Unemployment is at its highest level since the Covid pandemic, when levels were adversely affected by furlough.

According to the think tank, the labour market is softening, causing pay growth to weaken. Over the last 12 months, average weekly earnings, excluding bonuses, have risen by just £3.80, the Foundation revealed.

Hannah Slaughter, Senior Economist at the Resolution Foundation, said: 'The labour market is ending the year with a whimper, with falling job numbers and weakening wage growth.

'This means that Britain is likely to usher in 2026 with rising unemployment and the risk that pay packets could start shrinking again. Policy makers need to react to these trends.

'The government should be razor-focused on Britain's burgeoning unemployment challenge and redouble efforts to support job creation.'