What's happening? UK employment declined for a second consecutive month in January, with 43,000 fewer workers on payroll in December, particularly in retail and hospitality. Unemployment held at 5.1% in the three months leading up to November 2025, a four-year high, while private sector wage growth fell to 3.6% over the same period, the slowest in five years. Hospitality leaders blame rising taxes and looming business rate hikes for job losses. Vacancy levels remain flat despite more people joining the workforce. Unemployment is now at 1.8 million people in the UK, with job vacancies below the average before the Covid-19 pandemic. Young people are most affected as the labour market slows, highlighting the need to protect those who are most vulnerable. (The Guardian)

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Why does this matter? UK entry level jobs have dropped by nearly a third since ChatGPT launched in 2022. Although current data is too slow to attribute causation, the correlation between the launch of AI and youth unemployment is striking. Youth unemployment is at the highest rate since 2015 at 15.9%. The biggest vacancy drops in the UK sectors include traditional white collar jobs, sales and customer service, admin and secretarial roles, all of which provide entry-level roles that are being decreased by AI reducing the workload. At the World Economic Forum Annual Event in Davos in January, the Head of the International Monetary Fund, Kristalina Georgieva, warned that AI will be a "tsunami hitting the labour market", with 60% of jobs in advanced economies being either enhanced, eliminated or transformed by AI, predicting that 40% of all jobs will be affected globally.

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Inspecting the patterns – Between September to November 2025, 729,000 young people (16-24-year olds) were unemployed. Over the past two decades, youth unemployment has typically moved in line with overall unemployment trends, with young people experiencing sharper swings during major economic downturns such as the 2008 financial crisis and the Covid-19 pandemic. In recent years, however, this pattern has broken, with unemployment rising among young people in London and across the UK while rates for those aged 25-64 have remained comparatively stable. The divergence suggests the current rise in youth unemployment reflects a structural shift rather than a cyclical downturn in the labour market.

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Economic changes – AI is not the sole driver. Hiring has become more expensive following increases in employer National Insurance contributions that started in April 2025. Furthermore, the National Minimum wage will rise again in April 2026, having already risen 6.7% for over-21s and 16.3% for 18-20-year-olds since April 2024. This is aimed to benefit 2.7 million people, although critics such as the Resolution Foundation, a think tank focused on improving living standards for low to middle incomes, predict  the increase could make it harder for young people to find a job due to hiring becoming more expensive, exacerbating the decline in job vacancies for young people. Even with increases in minimum wage, the Prince’s Trust found that one in ten young people have declined job offers because they could not afford to take them, as travel costs and living expenses outweighed pay.

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Inspecting the numbers – Although there certainly is a problem, the increase in unemployment is not necessarily all from job and money cuts. From February 2024 to October 2025, the proportion of people aged 16 and over who were economically inactive – those choosing not to work for educational purposes, childcare etc. – fell from 37.2% to 36.1%, equating to around 643,000 people re-entering the workforce and 280,000 seeking work in the first nine months of 2025. As these individuals begin actively seeking work, they are captured in unemployment statistics even if job availability has not decreased, contributing to rising unemployment figures. This highlights the need to inspect ONS figures carefully and understand how they have been created, but it does not diminish the overall trends affecting young people.

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Looking forward – The government has pledged 50,000 new apprenticeships and removing the 5% levy on apprentices for under-25s, aiming to address the not in employment, education or training (NEET) crisis which currently affects one in eight young people. However, apprenticeships have fallen 40% over the past decade and concerns remain that current schemes may not work effectively across sectors such as hospitality, where the increase in minimum wage and business taxes have posed big problems. While the rise in unemployment can be explained by multiple factors, youth unemployment now appears structurally detached from broader trends due to AI, requiring targeted, sector-aware policy responses.