As of May 2026, we’ve reviewed the latest UK labour market data from the Office for National Statistics (ONS), covering the period from January to March 2026, with early indicators for April 2026. The latest figures suggest that the labour market is continuing to soften gradually, with vacancies declining further and payroll numbers showing renewed weakness, despite relative stability in employment levels overall.

These insights remain important for our business, helping to shape workforce planning, recruitment strategy and pay decisions. While improvements to the Labour Force Survey (LFS) continue to strengthen the quality of the data, the ONS advises caution when interpreting short-term movements because of ongoing volatility in some estimates.

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Key Findings

Payrolled Employees

HMRC payroll data shows a continued decline in employee numbers over the past year. Compared with March 2025, the number of payrolled employees fell by 104,000 (0.3%) in March 2026. On a monthly basis, payroll employment also slipped by 28,000 between February and March 2026.

Looking at the January to March 2026 period as a whole, payrolled employment was down by 94,000 (0.3%) compared with the same period last year and fell slightly on the quarter.

Early estimates for April 2026 point to a sharper monthly slowdown, with payroll numbers falling by 100,000 on the month and by 210,000 compared with a year earlier, bringing the provisional total to 30.2 million. The ONS notes that early estimates at the start of the tax year are typically more volatile and subject to larger revisions.

Employment and Unemployment

The UK employment rate for people aged 16 to 64 was estimated at 75.0% between January and March 2026. This is marginally higher than the previous quarter and broadly unchanged compared with a year ago.

The unemployment rate stood at 5.0%, down slightly on the quarter but still higher than the same period last year, indicating that labour market conditions remain softer than they were in early 2025.

Economic inactivity was estimated at 20.9%, rising slightly compared with the previous quarter but remaining below year-ago levels.

Vacancies and Claimant Count

Vacancy numbers continued to trend downwards in the latest release. Early estimates for February to April 2026 showed a decline of 28,000 (3.9%), reducing total vacancies to 705,000. This is the lowest vacancy level recorded since February to April 2021, highlighting a cooling in hiring demand across the labour market.

The Claimant Count for April 2026 increased compared with the previous month but remained lower than a year earlier, standing at 1.699 million. As with other early labour market indicators, the figure is provisional and subject to future revision.

Earnings Growth

Pay growth continued to moderate during the latest three-month period. Annual growth in regular earnings was 3.4%, while total earnings growth, including bonuses, was 4.1%.

Public sector regular pay growth remained stronger at 4.8%, compared with 3.0% in the private sector.

After adjusting for inflation, earnings growth remained relatively modest. Using CPIH, regular pay increased by 0.1% in real terms, while total pay rose by 0.8%. Using CPI, regular pay increased by 0.3% and total pay by 1.0%.

Labour Disputes

Industrial action remained relatively subdued in March 2026, with an estimated 23,000 working days lost because of labour disputes across the UK.

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Overall, the latest labour market figures point to a gradual easing in employment demand. Payroll employment and vacancies have both declined, while earnings growth continues to slow. Although employment levels remain relatively stable, the drop in vacancies to their lowest level in four years suggests employers are becoming increasingly cautious in their hiring activity as 2026 progresses.

Source: Labour market overview, UK – Office for National Statistics