Britain's two-speed labour market is not a revolution

THE BRITISH labour market is not undergoing a revolution. It is experiencing a contraction with an oddly shaped exception. New data from Indeed, the job board, shows that overall vacancies are down roughly 10% in the UK since January 2025, while postings mentioning artificial intelligence are rising. The headline suggests a two-track economy, one that rewards AI skills and punishes everything else. The reality is more prosaic, and more worrying: a weak macroeconomy is cutting jobs across the board, while a narrow band of senior, tech-adjacent roles holds on. The AI label is partly real, but it is also a symptom of how thin the overall hiring pie has become.

The broader labour-market context is not buoyant. The Office for National Statistics reports that total vacancies fell to 712,000 in the three months to June 2026, below the 789,000 pre-pandemic baseline. The unemployment rate stands at 4.9%, up from 4.7% a year ago. Payrolled employees have fallen by 89,000 over the same period, according to tax data from HM Revenue & Customs. Youth unemployment has reached 14%, the highest level in over five years, and more than a million 16-to-24-year-olds are not in education, employment or training. These are not the statistics of a booming market in which AI happens to be the star player. They are the statistics of an economy struggling to create jobs at all.

Into this landscape, Indeed's data shows that software developers are back in favour, with postings rising 14% in recent months, much of the increase tied to senior roles and positions directly connected to AI. IT and engineering have also held up, occupations where AI augments experienced workers by automating routine tasks. At the other end, manufacturing postings are down 58% from their peak in mid-2022; retail, accounting and marketing have seen double-digit declines. Jack Kennedy, a senior economist at Indeed, describes the result as a two-speed labour market, with demand concentrating around experienced workers and roles directly connected to AI.

There is substance in this observation. But two qualifications are necessary. First, the AI effect is being amplified by the weakness of the background. When overall hiring shrinks, the share of any category that keeps growing will look more dramatic. In the United States, Indeed's AI tracker - which measures the share of postings containing AI-related terms - reached 4.2% of all jobs in December 2025, while total job postings were just 6% above pre-pandemic levels. The number of AI-mentioning postings, by contrast, was 134% above their 2020 baseline. A rising numerator and a stagnant denominator make for an impressive ratio. Second, the jobs being created are not accessible to the people most in need of them. The new postings lean toward senior roles, not entry-level positions. As Indeed's own economists put it, the bar is rising precisely for those at the start of their careers.

The political response has been swift but misaligned. On July 28th, the prime minister, Mr Burnham, unveiled plans to create new technical education pathways for 14-year-olds in England, combining core subjects with employer-led projects and work experience. The national rollout is scheduled to begin in 2028. The idea of aligning education with local labour-market needs is sensible. The idea that it will address the jobs crisis facing today's young people is not. A programme launching in two and a half years cannot help a cohort whose unemployment has already surged. And the plan builds on the assumption that technical skills alone are the bottleneck, when the deeper problem is that fewer jobs of any kind are being created.

Mr Burnham's government is not entirely blind to the scale of the task. The work and pensions secretary, Mr McFadden, has visited Dutch youth-employment centres and announced plans for 180 new "Youth Hubs" to bring together education, welfare and health support. The NEET rate for 18-to-24-year-olds in Britain - 15.8% - is more than triple that of the Netherlands, which ministers increasingly cite as a model. The trouble is that the Netherlands' success rests on a labour market that absorbs young workers, not one that is shedding them. Copying institutional design is not the same as copying economic conditions.

To be sure, AI is reshaping what employers value. The same trend can be seen in the American market, where the number of job titles containing "AI" has tripled since 2022, touching one in 12 postings on Indeed. And, as the company's economists note, this is not merely a tech phenomenon: jobs in sales, education and management now routinely mention AI in their titles. The signal is clear enough. Employers are expecting candidates to use AI tools and want proof on the résumé. That changes hiring behaviour, even if it does not yet translate into mass job creation.

The risk is not that AI will cause a jobs apocalypse. The risk is the quieter kind: a labour market in which a small premium for specialist AI skills sits alongside broadly weak hiring, leaving large numbers of workers - especially the young, the displaced and the inexperienced - increasingly marginalised. AI is not the cause of the marginalisation. It is an accelerant, concentrating opportunity in roles that already require experience, credentials and a degree of luck.

The better policy answer is not more technical education, though that is not useless. It is a package that addresses the macroeconomic weakness suppressing job creation: fiscal policy that supports demand without fuelling inflation, immigration reform that supplies labour where shortages bite, and workplace protections that do not make employers too cautious to hire. Mr Burnham's government should resist the temptation to treat a cyclical downturn as a structural skills crisis. One is expensive to fix and requires time. The other requires the right economic conditions first.

The two-speed labour market is real enough. But the faster lane is narrow, senior and increasingly reserved for those who already have a seat at the table. The challenge is not to build more lanes. It is to get the engine running again.