UK jobs dropped sharply in December, wages slowed, and unemployment rose to a five-year high, signaling a cooling labor market.

Due to steep drops in retail and hospitality, UK payroll employment fell by 43,000 in December, the biggest monthly decline since November 2020. In the three months leading up to November 2025, wage growth slowed to 4.5%, the lowest since April 2022, while private sector growth was the lowest in years at 3.6%. The unemployment rate remained stable at 5.1%, the highest level in almost five years. Key factors mentioned by officials were weak business confidence and growing employment costs. Although the labor market is cooling, economists do not anticipate an immediate Bank of England rate cut, though a spring cut may occur.