February and March data confirm weakening of UK labor market

According to data released on Tuesday, the UK labor market is showing signs of slowing down. This points to a sharp drop in hiring ahead of this month’s tax hike on employers. At the same time, wage growth remains strong.

In the first three months of 2025, job vacancies dropped to their lowest level since February–April 2021.

Preliminary payroll data submitted by employers to tax authorities showed a reduction of 78,000 in employee number in March. This follows an unexpected February decline of 8,000 jobs, contrary to the projected 21,000 increase.

Yet despite the Office for National Statistics’ data showing a slowdown in hiring, wage growth remains stubbornly high, leaving the Bank of England puzzled. Policymakers are now trying to determine whether inflationary pressures in the labor market are easing enough.

Average weekly wages grew 5.9% year-over-year in February 2025, edging up from January's 5.8% increase.