UK Labour Market Shows Continued Cooling with Sixth Month of Declining Vacancies

The December 2025 labour market data from Adzuna represents a continuation of a broader deterioration trend that began mid-2025, with the UK now experiencing its longest streak of consecutive vacancy declines since the post-pandemic recovery period. The 15% year-over-year decline in advertised positions to 716,791 roles marks a significant structural weakness, as this represents the weakest annual vacancy reading since 2020—when the economy was still grappling with COVID-19 restrictions and their aftermath [1]. The magnitude of this decline suggests that the UK labour market has not achieved a sustainable recovery to pre-pandemic structural levels, despite the economic reopening that followed.

The deceleration in advertised salary growth—from 7.7% in November to 6.8% in December—carries substantial implications for both inflation dynamics and monetary policy decisions [1]. This cooling in wage pressure is particularly significant given the Bank of England’s recent emphasis on pay growth as a key determinant of its policy stance. Rate-setter Megan Greene warned on January 23, 2026, that strong UK pay growth could limit the central bank’s ability to implement interest rate cuts, making this deceleration a potentially pivotal development for the policy outlook [2][3]. The December rate cut brought the Bank Rate to 3.75%, representing the fourth reduction in 2025, and markets are currently not forecasting additional cuts for 2026—though economists at ING expect two more cuts based on weakening jobs data and falling inflation [4].

The sectoral breadth of this hiring slowdown is noteworthy. According to Adzuna Co-founder Andrew Hunter, “competition for roles intensified and hiring slowed across many of the UK’s largest sectors as the usual year-end uplift failed to materialise” [1]. This cross-sector weakness indicates that the labour market deterioration is not confined to specific industries but reflects broader economic caution among UK businesses. The Confederation of British Industry’s assessment reinforces this interpretation, with Deputy Chief Economist Alpesh Paleja noting that “businesses remain cautious, households are down-trading and confidence is still fragile” despite “tentative signs of stabilisation and resilience in some specific areas” [1].

: The cooling labour market creates a potentially constructive environment for Bank of England policy decisions. As wage pressures ease, the central bank may find greater flexibility to implement additional rate cuts if economic conditions warrant—addressing concerns raised by rate-setter Greene about the constraints imposed by strong pay growth. The current disconnect between market expectations (no rate cuts forecast for 2026) and economist projections (ING expecting two more cuts) suggests ongoing uncertainty about the policy trajectory that will be resolved by incoming labour market and inflation data.

: While the overall vacancy data presents a gloomy picture, early recovery signals are emerging in specific segments. The noted improvement in graduate and entry-level positions could signal the beginning of a white-collar labour market recovery, potentially indicating that employers are beginning to invest in entry-level talent despite broader hiring caution [1]. This bifurcation suggests a nuanced labour market where certain segments may recover ahead of others, creating opportunities for job seekers with appropriate qualifications while remaining challenging for experienced professionals seeking new positions.

: The labour market deterioration carries direct implications for household consumption patterns. With vacancy declines now extending into a sixth consecutive month, households may increasingly experience reduced job security perceptions, potentially accelerating the “down-trading” behavior noted by the CBI. This dynamic could create a self-reinforcing cycle where weaker consumer spending prompts further business caution, perpetuating the hiring slowdown. The aggregate effect may present headwinds for UK economic growth in the first half of 2026 unless offset by other economic drivers.

: The deceleration in advertised salary growth from 7.7% to 6.8% could help alleviate concerns about persistent services inflation, which has been a persistent challenge for UK policymakers. The Bank of England has closely monitored wage growth as an indicator of underlying inflation pressure, and this moderation—while still representing positive real wage growth—suggests that the tight labour market conditions that characterized earlier periods may be easing sufficiently to reduce second-round inflation effects.

: The vacancy level reaching its weakest annual reading since 2020 raises questions about the structural health of the UK labour market beyond cyclical economic fluctuations. If this weakness persists, it could indicate deeper structural issues related to productivity, sectoral composition, or demographic shifts that may require policy responses beyond traditional monetary or fiscal measures.

: Extended periods of labour market weakness typically lead to heightened consumer caution, which can create negative feedback loops affecting business investment and hiring decisions. The CBI’s characterization of “fragile” confidence suggests this dynamic is already in play, and sustained vacancy declines could accelerate household retrenchment.

: While not detailed in the current data, labour market conditions may vary significantly across UK regions, with certain areas potentially experiencing more severe contractions than others. This geographic heterogeneity could complicate policy responses and create uneven economic outcomes across different parts of the country.

: The easing wage pressure creates space for the Bank of England to potentially implement additional rate cuts if economic conditions deteriorate, supporting borrowing costs for households and businesses. This policy flexibility could prove valuable if external shocks or domestic weakness require economic stimulus.

: Employers who maintain hiring capacity during this period of labour market weakness may find opportunities to acquire quality candidates at more reasonable compensation levels. The noted improvement in graduate and entry-level positions suggests a buyers’ market for entry talent, potentially allowing organizations to strengthen their talent pipelines.

: The moderation in advertised salary growth—while representing a challenge for workers seeking wage increases—may help contain services inflation that has proven persistent. This could create conditions for more sustainable economic growth without the inflationary overheating that typically forces aggressive monetary tightening.

Metric	December 2025	November 2025	Change
Job Vacancies	716,791	745,448	-3.8% month-over-month, -15% year-over-year
Advertised Salary Growth	6.8%	7.7%	-0.9 percentage points
Vacancy Decline Streak	6 consecutive months	—	Since July 2025
Bank of England Rate	3.75%	—	After December 2025 cut

The data originates from Adzuna, a leading online jobs platform, providing insight into advertised rather than filled positions [1]. The timing of this release carries particular relevance given recent Bank of England commentary and the ongoing debate about the appropriate policy stance for 2026. While tentative stabilization signs exist in specific areas—particularly graduate and entry-level hiring—the overall picture presented by the data indicates that UK businesses remain in a cautious posture, with hiring decisions constrained by broader economic uncertainty and household sector weakness.