UK Jobs Market Shows Signs of Stabilization

The UK jobs market is finally showing tentative signs of stabilization, but it's more of a cautious pause than a robust recovery.

The latest KPMG and REC Report on Jobs for September 2025, compiled by S&P Global, revealed permanent staff recruitment declined at the slowest rate in a year. While that sounds positive, hiring has now contracted for 29 consecutive months.

"Recruiters have been reporting a trend towards stabilisation in the permanent job market since the summer, and today's data back that up for September," said Neil Carberry, REC Chief Executive. "The temporary market remains somewhat healthier, with growth in some regions."

Low employer confidence and cost concerns continue weighing on staff hiring, according to survey participants representing around 400 UK recruitment and employment consultancies.

The Numbers Tell a Mixed Story

Permanent placements fell again in September, but at a softer pace than previous months. The decline was "marked" rather than "sharp"—industry terminology indicating the contraction is easing without yet turning positive.

Temporary billings painted a slightly better picture, with some regional growth offsetting overall weakness. The temp market has proven more resilient throughout the downturn, offering flexibility that appeals to cost-conscious employers.

But job vacancies dropped at a marked rate similar to August levels, demonstrating that demand for staff remains subdued. The sustained fall in hiring combined with reports of redundancies drove a rapid increase in candidate numbers for both permanent and temporary positions.

"With very little positive news out there on the economy in recent months, and lots of speculation about the Budget, it is understandable that employers are cautious with their hiring," said Jon Holt, Group Chief Executive and UK Senior Partner at KPMG.

Pay Growth Grinds to Near-Halt

Starting salaries were up only marginally in September, approaching stagnation. Temporary pay rates showed similar weakness, barely budging from previous months.

The shift in supply and demand for workers placed downward pressure on wages. With more candidates chasing fewer jobs, employers have little incentive to raise compensation aggressively.

"Pay trends remain subdued where pay is set by the market rather than the Government," Carberry noted. "This suggests that pay growth should not be a drag on the Bank of England's upcoming interest rate decision."

The muted wage growth reflects a labor market where power has shifted decisively back to employers after years of worker leverage during the post-pandemic hiring frenzy.

Candidate Supply Surges

The availability of candidates increased rapidly during September, continuing a trend that began earlier in the year. Both permanent and temporary worker supply expanded sharply as redundancies and weak hiring demand pushed more people into active job searches.

This represents a dramatic reversal from recent years when candidate shortages plagued employers. Now, recruiters report an abundance of available talent—a clear signal of labor market weakness.

For jobseekers, the math is brutal: more competition for fewer opportunities creates a buyer's market where employers can be highly selective and compensation growth stalls.

Budget Uncertainty Looms Large

Much of the hiring caution stems from uncertainty around the November budget. Employers are waiting to see what Chancellor Rachel Reeves will announce regarding business taxes, employment costs, and economic policy.

"The public finances provide little room for manoeuvre in November," Holt acknowledged. "Some clear signals from the Chancellor that build on business confidence will hopefully support renewed hiring as we head into 2026."

The Employment Rights Bill also weighs on employer sentiment. "A genuinely pro-business, pro-growth Autumn Budget next month could provide much-needed relief, by avoiding unaffordable tax rises on business, committing to real practicality on the Employment Rights Bill, supporting flexible work and reforming public sector hiring," Carberry said.

Business leaders want clarity on how government policy will drive economic growth before committing to major hiring investments.

CEO Confidence Diverges from Reality

Interestingly, KPMG's annual CEO Outlook released this week revealed that chief executives are more optimistic about future growth prospects than the hiring data suggests.

"They are resilient and responding to challenges by adapting their investment strategies to focus on AI adoption, managing cyber risk and upskilling their talent," Holt said.

This creates a peculiar disconnect: CEOs feel bullish about long-term prospects but remain cautious about near-term hiring. They're investing in technology and skills rather than headcount, betting on productivity gains from existing staff rather than expansion.

What Stabilization Actually Means

The jobs market hasn't turned a corner yet. September's data shows the pace of decline easing, not growth returning. Think of it as a car slowing down rather than changing direction.

"We can hope that the jobs market and the economy may be moving towards calmer waters, but falling vacancies is a reminder that what is really needed is a shot of confidence in the wider economy to get things going," Carberry said.

Stabilization means conditions are no longer deteriorating rapidly. That's progress after 29 months of contraction. But stabilization isn't recovery. Job openings remain down, hiring sentiment stays weak, and pay growth hovers near zero.

For workers, this translates to a challenging environment where finding new positions takes longer, negotiating power remains limited, and career advancement opportunities feel constrained.

For employers, it means access to talent has improved dramatically but economic uncertainty prevents aggressive expansion plans.

The Road Ahead

The trajectory for the rest of 2025 depends heavily on November's budget and whether it builds business confidence without imposing additional costs on hiring.

Interest rate decisions from the Bank of England will also matter. Lower borrowing costs could encourage investment and expansion, potentially translating into more job openings.

But for now, the UK jobs market remains stuck in what economists call a "low equilibrium"—not in crisis, but not thriving either. Employers and workers alike are treading water, waiting for clearer signals about the economic future before making bold moves.

The deer-in-headlights analogy fits: frozen but not panicking, cautious but still functioning, uncertain about whether to move forward or brace for impact.

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