Wage growth slows as UK jobs market starts to cool
By Abigail Townsend
Date: Tuesday 13 May 2025
(Sharecast News) - Wage growth slowed and unemployment edged higher in March, official data showed on Tuesday, as the UK labour market softened in the face of higher taxes and a weaker economic outlook.
According to jobs data from Office for National Statistics, annual growth in average weekly wages was 5.6%, excluding bonuses, in the three months to March.
That was down from the 5.9% seen in the three months to February, and broadly in line with expectations.
In the fourth quarter, wage growth reached 6.4%. Including bonuses, wage growth was 5.5%.
Estimates for payrolled employees, meanwhile, eased 47,000 or 0.2% between February and March, and by 53,000 over the quarter.
Preliminary figures for April showed a further drop of 33,000 or 0.1% on the month.
The headline unemployment rate was 4.5% in January to March, up on the previous rate of 4.4%. The ONS is currently overhauling the methodology behind its Labour Force Survey
The slowdown in wage growth will be welcomed by the Bank of England, which has long been concerned about its inflationary impact.
Businesses, meanwhile, are also now facing a weaker economic outlook, on the back of Donald Trump's global trade war. Costs have also risen sharply since April, when changes to the minimum wage and employer National Insurance contributions came into effect.
Matt Swannell, chief economic advisor to the EY Item Club, said: "There are signs that the labour market is loosening. Vacancies continued to fall back in March, while employment estimates based on payroll information pointed to a second successive substantial fall in April.
"Today's data will have given the Monetary Policy Committee slightly more confidence that disinflation is continuing, but it also continues to highlight their difficult balancing act of supporting a weakening labour market that is still generating strong pay growth."
Neil Wilson, UK investor strategist at Saxo Markets, said: "UK employment data shows cracks emerging, which supports a more dovish bias from the BoE. As I've said before, the BoE should not be hanging around and [should] get in there with cuts. Inflation is not the problem now."
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