UK labour market cools: jobs and pay growth slow, says ONS

"The Office for National Statistics (ONS) said the number of people on payrolls dropped by 8,000 to 30.3 million in August, following a revised fall of 6,000 in July. Over the past 12 months, payrolls have contracted by 127,000. The unemployment rate held steady at 4.7% in the three months to July, in line with forecasts, but the latest data underlines a slowdown in hiring as demand for workers continues to weaken."

"Pay growth also softened. Average weekly earnings excluding bonuses grew by 4.8%, down from 5%, while pay including bonuses rose 4.7%. Economists and the Bank of England track wage data closely as a key driver of inflation. The figures come ahead of the Bank of England's latest policy meeting this week. Rates are expected to remain unchanged at 4% after being cut in August - the fifth reduction in a year."

"Market pricing suggests they could stay on hold for the rest of 2025, with policymakers signalling they are prioritising the fight against inflation despite evidence of a cooling jobs market. Inflation data due on Wednesday is forecast to show annual price growth of between 3.8% and 3.9% in August, nearly double the Bank's 2% target."

"Liz McKeown, ONS director of economic statistics, said: "The labour market continues to cool, with the number of people on payroll falling again, while firms also told us there were fewer jobs in the latest period.""

Payroll employment fell by 8,000 to 30.3 million in August, following a revised fall of 6,000 in July, and payrolls contracted by 127,000 over the past year. The unemployment rate remained at 4.7% for the three months to July, while vacancies dropped by 10,000 to 728,000, marking 38 consecutive months of declining job openings. Average weekly earnings excluding bonuses grew 4.8% (down from 5%), and pay including bonuses rose 4.7%, indicating softer pay growth. Monetary policy is expected to hold rates at 4% after recent cuts as inflation remains above target, with August inflation forecast near 3.8–3.9%. Sectors such as retail and construction report sharp slowdowns in demand for workers, underscoring the cooling labour market.

Read at Business Matters