Mixed Signals in Scotland’s Job Market: Opportunity or Warning Sign?

Employment falling, but pay rising

According to official figures for June-August 2025, Scotland’s employment rate (for people aged 16-64) dipped by 0.6 percentage points to 74.3%, placing it below the UK average of 75.1%. Scottish Financial News
At the same time, unemployment picked up by 0.2 points to around 3.9%, though this remains below the UK rate of 4.8%.
Also, early estimates from HMRC show that median monthly pay for payrolled employees in Scotland rose to £2,600 in September 2025. This is up by 5.9% compared with September 2024.

Why the divergence?

There are a few possible interpretations:

The decline in employment could suggest that fewer people are finding jobs, or that some exiting the workforce (economic inactivity) are not counted as unemployed. The economic inactivity rate in Scotland rose to 22.7%

Meanwhile, the rise in pay implies that those who are employed are possibly in stronger roles, or employers are under pressure to raise pay (because of inflation, skills shortages, or to retain staff)

From the employer perspective, rising costs (inflation, increased employer National Insurance contributions) and general market uncertainty means businesses may be cautious about hiring even as they raise pay for existing staff

What does this mean for different stakeholders?

For job-seekers:

The rising pay is a positive sign, especially if you’re already in work or negotiating a move

But the falling employment rate means competition may become tougher and roles may be fewer or more selective. You’ll likely need to emphasise your value, outcomes, and relevance to stand out

It could also mean more people are choosing to exit the workforce. This is opening up hidden opportunities for those willing to reskill or switch sectors

For employers / recruiters:

The data hints at a “tight” market in certain segments and you may need to raise compensation or improve benefits/working conditions to attract or retain talent

You may also need to keep a close eye on the labour supply; while some roles may remain hard to fill, others may face a slowdown

Investing in workforce planning, future-proofing skills, and flexible working may pay dividends in such a mixed environment

For policymakers / business ecosystem:

The mixed signals raise questions about structural changes in Scotland’s economy: if employment is falling while pay rises, is that because of sectoral shifts (e.g., job losses in some industries, growth in fewer, higher-paid roles)?

If economic inactivity is rising, then capturing potential workforce remains a critical priority (e.g., supporting people back to work, up-skilling, regional support)

Clear policy signals are needed to boost confidence among businesses and workers alike. As noted in the article, some stakeholders call for a more direct link between government policy and job market outcomes

Final thoughts

These mixed signals be seen as both a warning and an opportunity. On one hand, slipping employment and rising inactivity highlight vulnerabilities in the Scottish labour market. On the other hand, rising pay suggests pockets of strength, and opportunity for those able to align with growing roles/skills.
If you’re navigating the job market (whether as a job seeker or an employer), the key will be agility. Stay alert to shifting sector trends, differentiate your skill set (or talent offer), and maintain the flexibility to adapt.