UK unemployment falls to 4.2% amid strong job growth

Published: 21 October 2025. The English Chronicle Desk. The English Chronicle Online.

UK unemployment has dropped to 4.2% in the three months to September, marking the lowest rate since early 2020, as the labour market shows signs of resilience despite ongoing economic challenges. The latest data from the Office for National Statistics (ONS) highlights both the strength of employment and the evolving pressures faced by workers across the country.

The number of people out of work fell by 87,000 to 1.48 million, while the number of job vacancies remained high at 1.22 million, reflecting robust demand for workers across multiple sectors. Economists suggest that this tight labour market signals both opportunities and risks, as businesses struggle to fill roles while wage pressures grow.

The employment rate – the proportion of people aged 16 to 64 who are in work – rose to 75.8%, the highest level on record for this period. Average weekly earnings, excluding bonuses, increased by 4.3% compared to a year earlier, slightly outpacing inflation, which stood at 4% in September. This indicates modest improvements in real income, although concerns remain about the cost of living and its impact on household spending.

Healthcare, technology, and logistics sectors have been major contributors to employment growth, reflecting a sustained demand for skilled labour. Meanwhile, hospitality and retail industries have seen a resurgence in hiring following the pandemic-related downturn, supported by seasonal demand and increased consumer spending. Recruitment agencies report that while opportunities are abundant, many employers face challenges in attracting experienced staff due to competitive wage expectations.

Despite the positive employment figures, economists have warned of potential headwinds. Rising interest rates, inflationary pressures, and the cost-of-living crisis may influence both business investment and hiring decisions in the coming months. Additionally, underemployment – where people are working fewer hours than they wish or in jobs that do not fully utilise their skills – remains a concern, particularly among younger workers and those in gig economy roles.

Chancellor Rachel Reeves welcomed the latest figures, stating: “These employment numbers demonstrate the resilience of the UK workforce. Our priority is to ensure sustainable job growth, support skills development, and create opportunities across all regions of the country.” She emphasised that government initiatives, such as targeted training programmes and apprenticeships, are intended to help workers transition into high-demand industries and secure long-term career prospects.

ONS Chief Economist Jonathan Athow commented on the wider implications of the data, saying: “The labour market remains robust, but the economy faces a complex balancing act. Low unemployment is positive, yet policymakers must remain vigilant about inflationary pressures and the quality of employment available. Job growth alone does not fully address the broader economic challenges.”

Recent research also highlights regional disparities in employment. While London and the South East maintain high employment rates, areas in the North of England, Wales, and parts of Scotland face slower recovery, with underinvestment and lower productivity affecting local job markets. Analysts argue that addressing these inequalities is essential to achieving sustainable national economic growth.

The Bank of England has previously cautioned that a tight labour market could push wages higher, contributing to inflationary pressures. This dynamic makes the upcoming autumn budget particularly significant, as policymakers must weigh the benefits of low unemployment against potential risks to price stability and the broader economy. Economists note that wage growth could support consumer spending, but unchecked inflation may erode purchasing power and disproportionately impact low-income households.

Consumer confidence appears cautious, with households reportedly prioritising savings in response to economic uncertainty. Savings rates have risen slightly this year, suggesting that while jobs are plentiful, many individuals remain wary of rising costs and potential tax increases. Analysts suggest that economic policy will need to focus on balancing fiscal responsibility with measures that support household disposable income and maintain consumer demand.

Overall, the latest employment data provides a positive snapshot of the UK labour market as it heads into the final quarter of 2025. The combination of low unemployment, rising wages, and high vacancy levels indicates a resilient job market. Yet challenges remain in ensuring that growth is inclusive, sustainable, and aligned with long-term economic stability. Government strategies, private sector investment, and careful monetary policy will all play crucial roles in shaping the future trajectory of employment and household prosperity.