UK Payroll Data Shows Mixed Signals as Kent Labour Market Continues to Cool

Kent workers are seeing mixed signals from a labour market that has struggled for over a year, as revised government data shows a modest uptick in payrolled employment after months of decline.

The latest employment statistics paint a complex picture. According to ONS revised estimates, payrolled workers increased by 6,000 between December 2025 and January 2026 — a revision from earlier preliminary figures that had suggested a continued decline. However, early estimates for February 2026 point to a further fall of around 11,000, according to Retail Economics analysis, suggesting the January improvement may prove temporary.

The Reality Behind the Numbers

The recent data comes against a backdrop of persistent weakness that has seen payrolled employment fall in ten of the past fourteen months. Unemployment stands at 5.2 per cent — levels not witnessed for nearly five years. Youth unemployment has climbed to 16.1 per cent, according to ONS data, suggesting younger workers continue to bear the brunt of economic uncertainty.

But the most telling indicator may be the job market’s fundamental shift. There are now 2.5 unemployed people competing for every vacancy, a dramatic change from the one-to-one ratio seen in 2022. This rebalancing represents a return to pre-COVID norms, yet it signals reduced bargaining power for workers across all sectors.

Where the Jobs Are Disappearing

Retail and hospitality have experienced the steepest cuts, shedding approximately 120,000 positions compared to January 2025, according to ONS payroll data. These traditionally labour-intensive sectors have struggled with weak consumer demand and rising operational costs.

However, health and social work bucked the trend. According to ONS figures, the sector added around 37,000 employees over the twelve months to January 2026, even as manufacturing showed modest resilience with slight increases in vacancies.

The Wage Growth Slowdown

Annual wage growth has decelerated, with regular pay excluding bonuses falling to 3.8 per cent in the three months to January 2026, down from 4.1 per cent previously, according to the ONS. Private sector wage growth has eased further — approaching the levels economists consider consistent with the Bank of England’s 2 per cent inflation target.

This moderation could provide policymakers with greater confidence that inflation pressures are genuinely easing, potentially strengthening the case for interest rate cuts in the coming months.

A Low-Hiring, Low-Firing Economy

Redundancy notifications remain at low levels, suggesting employers are managing the downturn through reduced hiring rather than mass layoffs. According to Indeed’s Hiring Lab, job postings continue to decline gradually and new job inflows stand around 16 per cent below pre-pandemic levels.

Why aren’t businesses hiring? Employer sentiment showed modest improvement after the Chancellor’s Autumn Budget, but confidence in business expansion remains muted across most sectors.

Key Takeaways

• ONS revised estimates show payrolled workers rose by 6,000 in January 2026, though early February data suggests a further decline
• Unemployment remains elevated at 5.2% with youth unemployment reaching 16.1%
• Retail and hospitality shed approximately 120,000 jobs year-on-year, while healthcare added around 37,000 positions

What This Means for Kent Residents

Kent’s significant retail, hospitality and tourism sectors mean residents may face continued job market challenges despite the modest uptick in national payroll figures. Those seeking work will encounter increased competition, with 2.5 people now competing for every vacancy compared to equal ratios in 2022. That said, Kent residents working in healthcare and social care — sectors where the county faces particular recruitment pressures — are likely to find more favourable conditions, as these remain areas of genuine employment growth. For job search support, contact the National Careers Service on 0800 100 900.

Sources

• ONS PAYE Real Time Information January 2026
• Institute for Employment Studies Labour Market Statistics
• Indeed Hiring Lab UK Employment Figures