The U.Ok. labor market deteriorated additional within the three months to August 2025, with unemployment rising to 4.8% – its highest degree since Could 2021.

The newest Workplace for Nationwide Statistics knowledge revealed a regarding mixture of rising joblessness and protracted wage pressures that difficult the Financial institution of England’s (BOE) coverage outlook.

The newest stories counsel that U.Ok. companies are decreasing hiring or selecting to not exchange departing staff as financial uncertainty mounts. The deteriorating employment situations additionally partly mirrored the impression of upper Nationwide Insurance coverage contributions and elevated minimal wages applied earlier in 2025.

Key Takeaways:

• Unemployment fee jumped to 4.8% in June-August 2025, up from 4.7% within the earlier quarter and nicely above 4.1% a yr in the past
• Claimant depend surged by 25,800 in September to 1.692 million, far exceeding forecasts of 10,300
• Common wage progress (excluding bonuses) slowed to 4.7% year-on-year, whereas complete pay rose 5.0%
• Job vacancies fell to 717,000 in July-September, marking the thirty ninth consecutive quarterly decline
• Payroll employment dropped by 10,000 m/m, with an annual decline of 93,000

The mixture of rising unemployment and still-elevated wage progress offered a difficult situation for the BOE.

Whereas the weakening labor market instructed financial momentum was fading – doubtlessly justifying additional fee cuts – the 5.0% wage progress remained nicely above ranges in step with the BOE’s 2% inflation goal.

The sustained decline in job vacancies for practically 10 years additionally signaled persistent weak spot in labor demand, suggesting that companies remained cautious about growth amid ongoing financial uncertainties. This broad-based deterioration in labor market indicators pointed to potential challenges for U.Ok. progress within the months forward.

Hyperlink to U.Ok. ONS Labour Market Overview (September 2025)

Market Response

British Pound vs. Main Currencies: 5-min

Overlay of GBP vs. Main Currencies Chart by TradingView

Foreign money merchants appeared to focus extra on the deteriorating employment image, with futures markets instantly pricing in greater odds of BOE fee cuts earlier than year-end.

The numerous leap within the claimant depend and the breach of the psychologically necessary 4.8% unemployment degree probably strengthened expectations that the U.Ok. financial system was dropping steam extra quickly than anticipated.

The British pound, which had been taking cues from countercurrency flows, bought slammed broadly and sharply after the info hit. Sterling took the toughest beating in opposition to the Canadian greenback and safe-haven currencies just like the greenback, yen, and franc earlier than clawing again some losses an hour later.

The pound chopped round by way of many of the day, however the early London selloff set the tone. By the point New York closed up store, GBP ended decrease throughout the board, besides in opposition to commodity-related currencies just like the Aussie and Kiwi.