Scottish economic bulletin: March 2025

Labour Market

Unemployment rose to 3.8% in the fourth quarter of 2024, while earnings growth picked up in January.

Employment, Unemployment, and Inactivity

• The labour market remained robust in the final quarter of 2024 with relatively low unemployment and high, stable levels of employment, as latest data indicates a continued pattern of easing underlying tightness over the year.
• For October to December, Labour Force Survey (LFS) data show that the unemployment rate in Scotland rose 0.5 percentage points (p.p) over the quarter to 3.8%, although is down 0.7 p.p when compared to Q4 2023. Scotland’s employment rate rose over the quarter by 0.9 p.p. and by 0.7 p.p over the year, to 74.2%. The inactivity rate fell by 1.2 p.p and 0.1 p.p, over the quarter and on an annual basis respectively, to 22.8%.^[10],[11]

• Wider labour market indicators also suggest continued labour market resilience going into 2025, albeit with indications of some loosening over the past year. Latest RTI data shows that there were 2.46 million payrolled employees in Scotland in January 2025, increasing by 0.2% (or 5,000 employees) from December, while falling 0.1% (or by 2,000 employees) annually.
• Similarly, Scotland’s claimant count unemployment rate remained at 3.8% in January, however the number of claimants rose over the year by c. 4,600 to c. 110,600.^[12],[13]

Recruitment Activity

• Online vacancies data shows that recruitment intentions picked up at the start of 2025, however they remain lower than the same time last year, indicative of a gradually loosening labour market.^[14]
• In January there were over 42,300 newly advertised jobs online in Scotland, down by 5.9% when compared to January 2024, while there was a 16.3% decrease in adverts for the UK as a whole. Newly advertised jobs online in Scotland had peaked at over 74,500 during 2022.^[15]

• Wider business survey data further suggests moderate easing in employment intentions. RBS Growth Tracker data for January indicated that private sector businesses decreased staffing levels for the second consecutive month, and to a slightly greater extent than in December, following a trend of slowing recruitment over the second half of 2024.
• Looking ahead to March, BICS data shows that most businesses (66.3%) expect employee numbers to stay the same, however the share of businesses expecting an increase in employees rose to 14.5% (below the 2024 average rate of 17.1%) while the share of businesses expecting the number of employees to decrease fell to 9.3% (higher than the 2024 average rate of 8.8%).

• Further data from BICS underlines the stabilisation of the labour market, as latest data for February suggests easing levels of recruitment difficulties and worker shortages. The share of businesses reporting recruitment difficulties fell from 23.1% to 19.9% in March 2025, while 22.6% of businesses reported worker shortages, down from 24.4% the previous month. This is in line with the broader pattern of gradually lower levels of business recruitment concerns from the second half of 2024.

Earnings

• Labour earnings continued in their trend of positive real terms growth at the start of 2025, growing slightly faster than in December, albeit remaining at a slower pace than earlier in 2024 as nominal growth eased and inflation increased.
• Nominal median monthly PAYE pay in Scotland was £2,486 in January, and grew by 5.2% on an annual basis. This is up from growth of 4.8% in December 2024 but remains lower than the higher levels of nominal growth seen during most of 2023 and 2024.^[16]

• Adjusting for inflation, earnings grew by 2.2% in real terms on an annual basis in January (up marginally from 2.1% in December).
• Looking ahead, earnings growth is expected to further moderate. The Bank of England Decision Maker’s Panel (DMP) reported annual UK wage growth of 5.3% in the 3-months to January and anticipated year-ahead wage growth of 3.9%, with both measures down by 0.1 p.p from the previous survey, suggesting firms expect the rate of wage growth to decline by 1.4 percentage points over the next year.^[17]