New figures from the Office for National Statistics have laid bare a stark divergence in the UK’s labour market, with unemployment in Wales falling sharply against a national backdrop of rising joblessness that has reached its highest level in nearly five years.
The UK unemployment rate increased to 5.2% in the three months to December, up from 5.1% in the previous quarter, according to the ONS. This marks the highest rate since January 2021 and, outside the pandemic era, the worst since the autumn of 2015. More recent data indicates the rate was 5.1% in November 2025, with the Resolution Foundation estimating it had risen to 5.0% in the three months to August 2025.
In a contrasting performance, Wales saw its unemployment rate drop by 1.2 percentage points to 4.5% over the three months to last November – a fall of 18,000 people to 70,000. This was the largest decrease of any UK nation or region, with only Northern Ireland (down 0.2%) and the east of England (down 0.1%) recording smaller declines on the quarter.
A Picture Clouded by Data Concerns
The Welsh Government has immediately urged caution in interpreting these headline ONS figures, citing well-documented concerns about the reliability of the Labour Force Survey data upon which they are based. The Office for National Statistics itself has acknowledged issues due to falling response rates and is working to transition to a new Transformed Labour Force Survey, advising that a range of sources be used for accuracy.
Pointing to the Annual Population Survey as an alternative measure, a Welsh Government spokesman said evidence from a range of sources suggests the labour market in Wales has followed similar trends to the UK since the pandemic. APS data presents a more volatile picture: for the year ending September 2025, the unemployment rate in Wales was 4.5%, an increase of 1.6 percentage points from the previous year, while the UK rate was 4.2%. For the year ending June 2025, the Welsh rate was 4.1% (UK 4.0%), and for the year ending March 2025, it was unchanged at 3.5% (UK 3.8%).
Youth Unemployment Reaches Crisis Point
The national figures reveal a particularly acute crisis for young workers. The ONS reported the unemployment rate for 16 to 24-year-olds in the UK surged to 16.1% in the latest quarter – the highest level since early 2015.
According to the Resolution Foundation think tank, this means UK youth unemployment is now higher than the European Union average for the first time since records began in 2000. The EU rate stood at 14.9% in the final three months of last year and had eased to 14.7% by December 2025. Other estimates show the UK youth unemployment rate was 15.9% from one source, and 14.2% for 16-25 year olds in the period March-May 2025, increasing to 14% by December 2025. In Wales, APS data for the year ending September 2025 puts youth unemployment at 16.3%, a dramatic increase of 9.5 percentage points year-on-year.
“At the end of last year almost one-in-six young people who wanted to work couldn’t find a job,” said Louise Murphy, a senior economist at the Resolution Foundation. “Unemployment risks climbing even further in 2026. Getting youth unemployment down in this country must be a top priority.”
The Persistent Challenge of Economic Inactivity
The data underscores a persistent structural challenge in Wales: economic inactivity. The ONS figures show 24.8% of working-age adults in Wales are economically inactive – 485,000 people – which is significantly higher than the overall UK figure of 20.8%. APS data for the year ending June 2025 confirms this gap, with a 24.1% rate for those aged 16-64 in Wales compared to 21.3% across the UK. Notably, Wales has the highest economic inactivity rate for people aged 50 to 64 (34.1%) among UK nations in 2025.
Long-term unemployment in Wales has shown considerable volatility in the APS figures. It accounted for 21.6% of all unemployed in the year to June 2025 (down 2.2 percentage points year-on-year), but was 24.0% in the year to March 2025 (up 2.7 points).
Policy Shifts and Sectoral Strain
Economists point to specific policy changes as key contributors to the weakened jobs market, particularly for younger workers. A sharp rise in the UK’s minimum wage over the past three years has seen rates for 21-22 year olds increase by 33% and for 18-20 year olds by 46%, raising concerns about negative impacts on youth employment.
Furthermore, changes to employers’ National Insurance contributions introduced in April 2025 – which increased the main rate from 13.8% to 15% and reduced the threshold – are estimated to have added 2% to employers’ payroll costs. Sectors like retail and hospitality, which rely heavily on entry-level and younger workers, have come under particular strain, with some companies cutting jobs or slowing hiring in response.
The Conservative opposition has squarely blamed the Labour Government’s policies for the rising jobless rate. “The latest rise in the jobless rate was the predictable result of bad decisions and economic incompetence,” they said. Shadow work and pensions secretary Helen Whately argued that “entry-level roles are the first to disappear from Labour’s tax hikes.”
In Wales, the Welsh Conservatives have criticised the Welsh Labour Government’s economic management, citing policies like tourism taxes and high business rates. They propose supporting key industries, scrapping business rates for small businesses, and abolishing the tourism tax.
Government Responses and Job Creation Pledges
In response, Work and Pensions Secretary Pat McFadden highlighted that there are “381,000 more people in work since the start of 2025,” but acknowledged more needs to be done. He pointed to a “£1.5 billion drive to tackle youth unemployment” and plans to make it easier to find apprenticeships, alongside investment to create 50,000 new apprenticeships.
The Welsh Government noted it has “supported about 46,000 jobs this Senedd term through business support.” It also highlighted that a record 20 renewable energy projects in Wales – encompassing onshore wind, solar, and tidal energy – received UK Government backing in February 2026, with the potential to create thousands of new green jobs.
Other ONS data showed regular wage growth fell to 4.2% in the three months to December, its lowest level in almost four years, though it was 0.8% higher after Consumer Prices Index inflation is taken into account. In a modest positive sign, vacancies increased by 2,000 to 726,000 in the three months to January, the second consecutive rise.
However, ONS director of economic statistics Liz McKeown said the data indicated “weak hiring activity” and that “more people who were out of work are now actively looking for a job.” She added that the number of unemployed people per vacancy has reached a new post-pandemic high.
Redundancies increased by 11,000 to 145,000 in the final quarter of 2025, while the number of workers on payrolls fell by 6,000 in the three months to December and is estimated to have dropped by a further 11,000 in January to 30.3 million.
This labour market data follows recent ONS growth figures showing the economy eked out meagre growth of 0.1% in the final quarter of last year. Experts said the weak jobs picture will reinforce expectations for the Bank of England to cut interest rates again next month, potentially to 3.5% from the current 3.75%, with an expected drop in inflation adding to the argument for a reduction.
