THE unemployment rate in the UK is at 5% with the lowest number of vacancies since 2021 as experts fear “the economy is stuck in first gear”.
The estimated UK employment rate was largely unchanged on the year, but increased by 0.1% to 75% in the latest quarter (January to March 2026), compared with the previous quarter (October to December 2025), new data shows.
The estimated UK unemployment rate increased by 0.5% on the year, but decreased by 0.2% in the latest quarter, to 5%.
Vacancy estimates decreased on the quarter, with early estimates for February to April 2026 suggesting a decrease of 28,000 (3.9%) vacancies to 705,000, compared with November 2025 to January 2026. This is the lowest level of vacancies since February to April 2021, data shows.
Total estimated vacancies were down by 54,000 (7.1%) in February to April 2026 from the level of a year ago.
There were 2.5 unemployed people per vacancy in January to March 2026. This has remained unchanged since July to September 2025, after previously increasing quarter on quarter since July to September 2024.
The economy is stuck in first gear
Katie Dunn, MD of KD Recruitment, said she is seeing the slowdown in the jobs market first-hand.
She added: “It is encouraging to see unemployment edge down slightly, and we should recognise the resilience that still exists in the UK labour market. People are continuing to find work, businesses are still recruiting, and there are still opportunities across many sectors.
“However, falling vacancies show that employers are becoming more cautious. This is not a jobs market that has stopped, but it is one that is moving more carefully. As a recruitment business that contributes to Recruitment and Employment Confederation (REC) labour market data, we are seeing this first-hand. The latest REC Labour Market Tracker showed new job postings fell by 7.7% between March and April 2026 and were down 5.6% year on year.
“However, active postings remained above 1.6 million and were still 7.3% higher than a year earlier, showing that underlying demand remains. What this tells us is that businesses still need people, but many are weighing up recruitment decisions more carefully because of rising costs, uncertainty and pressure on margins.”
Kate Underwood, Founder at Southampton-based Kate Underwood HR and Training, said the jobs market is very weak.
She added: “Yes, it does reflect what a lot of small businesses are feeling. The real story isn’t the tiny dip in unemployment to 5%, it’s vacancies dropping to 705,000, the lowest since early 2021. That’s what you see when owners are being careful.
“Hiring gets pushed back, growth roles get shelved, and people only recruit when they absolutely have to. Small businesses aren’t hiring with confidence, they’re hiring with caution. The slight fall in unemployment can just mean people are staying put and moving less because confidence is wobbly, not because everything’s suddenly fine.
“You might get more applicants, but that doesn’t always mean you get the right applicants, and skills gaps are still very real.”
These numbers may well get worse in the coming quarters
Rob Mansfield, Independent Financial Advisor at Tonbridge-based Rootes Wealth Management, predicted that the unemployment rate will get worse in the coming months.
He said: “A reducing number of vacancies suggests that the economy is very close to full employment and yet there are still 1 in 20 people unemployed.
“This isn’t an obvious recipe for the growth the government is seeking and with higher employment taxes and the threat of AI reducing the need for future employment, these numbers may well get worse in the coming quarters.”
Scott Gallacher, Director at Leicester-based Rowley Turton, said the economy is stuck in a rut.
He added: “The UK economy still appears stuck in first gear. Speak to almost any graduate leaving university at the moment and many will tell you it is incredibly difficult to secure a job, particularly professional roles.
“Higher Employers’ National Insurance and minimum wages will inevitably encourage some firms to look harder at technology, automation, efficiencies and outsourcing to control costs, all of which reduce the incentive to hire. Combined with weak economic growth and the increasing impact of AI, it paints a bleak picture for the jobs market.”
The UK labour market is cooling rather than collapsing
Graham Nicoll, Financial Planner, Chartered FCSI at NCL Wealth Partners, said businesses are not hiring as much as they were.
He added: “This data points to a UK labour market that is cooling rather than collapsing. Falling vacancies, now at their lowest level since 2021, suggest many business owners are becoming more cautious around recruitment as economic uncertainty, higher employment costs and weaker confidence continue to weigh on decision making.
“While the slight fall in unemployment is positive, a 5% unemployment rate still reflects a softer economic backdrop than we have seen in recent years. Businesses are focusing more heavily on productivity, profitability and retaining key staff rather than aggressive expansion.
“The increase in the number of unemployed people per vacancy also suggests the jobs market is becoming less tight, which may ease some wage pressure for employers but also signals slower economic momentum overall.”
Harry Goodliffe, Director at Winchester-based HTG Mortgages, said young people are struggling in this market.
He added: “Cracks are again showing in the jobs market. This doesn’t feel like good news, despite unemployment slightly dipping. The bigger thing here is vacancies falling again, businesses clearly aren’t hiring with confidence.
“With fewer job opportunities out there, especially for younger people, graduates and anyone trying to switch careers. That’s the kind of slowdown people start to feel pretty quickly, even before unemployment rises properly.”
Cracks are again showing in the jobs market
Colette Mason, Author and AI Ethics Consultant at London-based Clever Clogs AI, said the current market is an “economic trapdoor” for young people.
She added: “A 0.2 percentage point drop in unemployment sits inside the ONS’s own margin of error. It is statistically indistinguishable from nothing happening at all. What did happen: 60,000 more people became economically inactive. The largest increase was among 16-to-24-year-olds, including students not looking for work and young people inactive for unspecified reasons.
“Youth unemployment already sits around 14.5%. Graduate roles have collapsed 45% in one year. The unemployment-to-vacancy ratio has flatlined at 2.5 since last July with 2.5 people competing for every opening, in a market producing fewer openings every quarter. The real story is in who’s stopped being counted.
“When a 22-year-old sends 200 applications into silence and eventually stops trying, they disappear from the unemployment figures. The number improves. The person’s quality of life doesn’t. For the youth with a ‘Bank of Mum and Dad’, this is stressful. For the ones without, it’s an economic trapdoor with no ladder back up.”
It’s an economic trapdoor with no ladder back up
Martin Rayner, Mortgage broker and financial adviser at Compton Financial Services, said unemployment is higher year-on-year.
He added: “The bigger picture is clear. Vacancies are falling, hiring is slowing and businesses are becoming more cautious. When you increase the cost of employing people through higher taxes and rising employment costs, companies respond by cutting recruitment.
“Businesses do not have an endless pot of money. At the same time, this is not just about a weak economy. AI and automation are already replacing roles and improving efficiency, meaning many firms simply need fewer staff than before. That trend is only accelerating.
“The slight quarterly drop in unemployment is welcome, but focusing on one quarter risks missing the wider trend. Unemployment is still higher year-on-year and vacancies are now at their lowest level since 2021. That points to a labour market that is gradually weakening rather than strengthening.”
Chris Barry, Director at London-based Thomas Legal, said staff costs have risen by 20% since 2020 for businesses.
He added: “The conveyancing market remains extremely competitive. Good people are hard to come by and if they decide to move, they are snapped up quickly. Entry level roles are still in demand despite the rise in technology.
“Many conveyancing firms have sadly closed this year due to financial difficulty and this is no doubt a result of minimum staff costs rising by over 20% since 2020. Technology will no doubt improve the sector making it less reliant on people for admin tasks but this is difficult to implement across firms who have little budget to switch from post, dictation and fax.”
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