Young People Bear the Brunt of UK Jobs Downturn, Thinktank Warns

Young people are once again finding themselves on the front line of a weakening UK labour market, according to a new report from the Resolution Foundation, released ahead of official data expected to show unemployment rising again this autumn. The findings arrive during a pivotal week for the economy, with fresh figures on jobs, inflation and interest rates all set to shape the policy debate as growth falters and hiring slows.

City economists expect Tuesday’s update from the Office for National Statistics (ONS) to show the UK unemployment rate edging up from 5% in September to 5.1% in October. While the increase may appear modest, analysts warn it is part of a broader trend pointing to a sustained jobs downturn—one that is falling disproportionately on young people entering or attempting to move within the labour market.

The Resolution Foundation argues that Britain is experiencing a growing “jobs deficit”, with employers cutting back on recruitment across both the public and private sectors. As a result, a rising number of young people—graduates and non-graduates alike—are struggling to find work, echoing patterns seen after the 2008 financial crisis and during the Covid pandemic.

A changing narrative on the jobs market

In recent years, public discussion about the UK labour market has focused heavily on economic inactivity, particularly among older workers who left employment during or after the pandemic because of long-term ill health. While this remains a significant challenge, the Resolution Foundation says it has obscured a more immediate and troubling trend: rising unemployment driven by a lack of available jobs.

Nye Cominetti, the thinktank’s principal economist, said the emphasis on inactivity had distracted attention from the core issue now facing jobseekers.

“In recent years, public debate has centred around an ‘inactivity crisis’ caused by ill health and disability,” he said. “But while rising levels of health-related inactivity are a big problem, rising unemployment is the forgotten driver of Britain’s current jobs downturn.

“Young people again find themselves at the heart of this downturn, just as they were in the wake of the financial crisis and Covid. Policymakers and employers need to redouble efforts to support them.”

The report highlights that, unlike earlier phases of the post-pandemic recovery—when vacancies were plentiful and employers struggled to recruit—the current slowdown is characterised by fewer opportunities for new entrants. Graduates leaving university and school leavers looking for their first foothold in the labour market are encountering reduced hiring, hiring freezes and more intense competition for entry-level roles.

Unemployment expected to rise further

Although the Bank of England and the Office for Budget Responsibility (OBR) believe unemployment may now be close to its peak, other forecasters are less optimistic. Several economic analysts suggest the unemployment rate could climb as high as 5.5% next year as companies retrench in response to higher taxes, weak consumer confidence and persistently sluggish economic growth.

The ONS data on Tuesday will be followed by November’s inflation figures on Wednesday, with economists expecting a slight easing in headline inflation from 3.6% to 3.5%. On Thursday, attention will turn to the Bank of England’s interest rate decision, with markets increasingly confident that policymakers are preparing to cut rates.

A Reuters poll of City economists suggests a majority of the Bank’s nine-member monetary policy committee (MPC) could vote to reduce the base rate from 4% to 3.75%. Such a move would reflect growing concern within the Bank about the health of the economy and the impact of higher borrowing costs on employment.

Bank governor Andrew Bailey, who voted to keep rates on hold at the previous meeting, has signalled a shift in tone in recent speeches. He is expected to join the four MPC members who previously backed a rate cut, citing slowing growth and rising unemployment as reasons for easing monetary policy.

Growth stalls as hiring slows

Underlying the deterioration in the jobs market is an economy struggling to gain momentum. Ruth Gregory, deputy chief UK economist at Capital Economics, said recent data painted a bleak picture of growth.

“It’s striking that the economy has only grown in one of the past seven months,” she said, noting that October’s 0.1% contraction left the economy no larger than it was in April.

This stagnation has fed directly into weaker labour demand. Businesses facing higher operating costs, subdued demand and uncertainty over the outlook are scaling back recruitment plans, with knock-on effects for those seeking work for the first time or trying to progress early in their careers.

The Resolution Foundation attributes most of the recent rise in joblessness to this weaker economic backdrop, rather than to changes in labour supply. While participation rates remain relatively high, the number of available jobs has failed to keep pace with the number of people looking for work.

Young people under pressure

Nowhere is this imbalance more evident than among young people aged 16 to 24. Ministers are increasingly alarmed by the state of the youth jobs market as the number of young people not in education, employment or training (Neet) approaches one million.

This trend has long-term implications. Extended periods of unemployment early in working life are associated with lower earnings, poorer health outcomes and weaker attachment to the labour market over time. For policymakers, the risk is that a generation entering adulthood during a prolonged period of weak growth will carry the scars for years to come.

International comparisons add to the concern. A report published last week by consultants PwC showed the UK had slipped four places in the international rankings for youth employment, falling to 27th out of 38 countries in the Organisation for Economic Co-operation and Development (OECD). The decline underscores how Britain’s labour market is underperforming relative to its peers when it comes to integrating young people into work.

Employment falling despite high participation

One of the more striking findings in the Resolution Foundation’s report is that falling employment is not being driven by a withdrawal from the labour market. Instead, it reflects a straightforward lack of jobs.

The thinktank estimates that the UK’s working-age employment rate fell by one percentage point between October 2020 and September 2025—the equivalent of around 415,000 workers. Crucially, it says this decline is “entirely accounted for by higher unemployment, not rising economic inactivity as many people assume”.

Participation rates remain historically strong. The share of people either in work or actively looking for work stood at 79.5% in the latest data—above the pre-pandemic level of 79.2% and close to the record high of 79.9% reached in 2023. In other words, people are still willing to work, but jobs are becoming harder to find.

For young people, this mismatch is particularly acute. Many are actively seeking work or combining job searches with education or training, only to find that vacancies have dried up. Entry-level positions, traditionally a gateway into employment, are often the first to be cut during downturns.

Policy choices under scrutiny

The Resolution Foundation’s warning adds pressure on policymakers to respond. While monetary policy may soon turn more supportive through interest rate cuts, economists argue that this alone will not be enough to address the structural challenges facing young workers.

Targeted interventions—such as expanded apprenticeships, wage subsidies, improved careers support and investment in sectors with strong job-creation potential—are likely to be needed to prevent a prolonged period of youth unemployment. Public sector hiring, which has also slowed, could play a role if fiscal conditions allow.

At the same time, employers are being urged to consider the long-term consequences of cutting back on early-career recruitment. Past downturns have shown that firms which stop hiring young workers can struggle later to rebuild skills pipelines and leadership capacity.

A familiar but urgent warning

For many economists and labour market experts, the Resolution Foundation’s findings have an uncomfortable familiarity. Young people were hit hardest by job losses after the financial crisis and faced severe disruption during the pandemic. Now, as the economy weakens again, they appear to be bearing a disproportionate share of the pain.

The difference this time is that participation remains high, and the problem is not a lack of willingness to work but a shortage of opportunities. Without a concerted response, the thinktank warns, the current downturn risks becoming another defining setback for a generation already shaped by repeated economic shocks.

As the UK awaits this week’s key data releases, the message from the Resolution Foundation is clear: rising unemployment, particularly among young people, should be at the centre of the policy debate. Failing to act now could entrench long-term disadvantage and undermine the country’s future workforce just as it is most needed.

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