UK wage growth slows as jobs market cools
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Wage growth across Great Britain has slowed, as the jobs market cools and companie cut jobs.
The latest labour market data, just released, shows that annual growth in employees’ average earnings (excluding bonuses) slowed to 4.8% in May-July this year, down from 5% a month earlier.
With inflation rising in recent months (to 3.8% in July), this slowdown in earnings means households will be squeezed harder by the cost of living.
Pay rose faster in the public sector – up 5.6% per year – compared with 4.7% for the private sector, the Office for National Statistics reports.
The ONS also flags that company payrolls shrank, by an estimated 142,000 in the year between July 2024 and July 2025, a sign that companies have been cutting back on hiring due to economic uncertainty and the rise in employers’ national insurance rates.
The estimated number of vacancies in the UK fell by 10,000 to 728,000, in June to August, today’s data shows. That’s the 38th consecutive quarterly fall.
ONS director of economic statistics Liz McKeown says:
“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.
“This weakness is reflected in a slight increase on the quarter in the unemployment rate. The number of vacancies also fell on the quarter, though the rate of decline appears to be slowing.
“Wage growth excluding bonuses edged down further in cash terms, though it remains strong by historic standards.”
Also coming up today….
Chancellor Rachel Reeves will host bosses of top US and UK financial firms in Downing Street on Tuesday morning as the government tries to highlight economic ties between the two countries at the start of Trump’s state visit.
The meeting, which will be jointly hosted by US Treasury Secretary Scott Bessent, will see senior bosses from BlackRock, Barclays and Blackstone gather in Whitehall as the chancellor seeks to secure further foreign investment that could help spur growth, and deliver positive headlines ahead of a challenging autumn budget in November.
The agenda
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7am BST: UK labour market data
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8am BST: Worldpanel’s UK supermarket inflation data
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11am BST: Israel’s Q2 GDP report
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1.30pm BST: US retail sales for August
-
2.15pm BST: US industrial production data for August
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3pm BST: Parliament’s science committee to examine Merck’s decision to abandon the expansion of its UK operations.
Key events
UK jobs data: political reaction
The UK’s new Work and Pensions Secretary, Pat McFadden, has spotted some bright spots in today’s labour market reports.
He points to a drop in the economic inactivity rate (people neither in work nor looking for a job), which dipped by 0.02 percentage points over the last quarter to 21.1%.
McFadden says:
“Today’s figures show signs of progress with economic inactivity and redundancies continuing to fall.
“But we must futureproof our workforce by giving people the opportunities and skills they need to secure the jobs of tomorrow.
“It is vital that our £240 million Get Britain Working plan is felt by people across the country, whether it’s through targeted support for young people entering the workforce, or joining up work, health and skills support.
“The true strength of the UK’s economy lies in the British people, which is why we are unlocking opportunity in every part of the country to drive forward economic growth under our plan for change.”
But Daisy Cooper, the Liberal Democrat Treasury spokesperson, said Labour had committed an act of “self sabotage” by pushing more people out of work.
Cooper added:
“[It has put] even more pressure on already stretched public services and leaving businesses scrambling just to keep the lights on.”
JLR production pause extended until Wednesday 24 September
Jaguar Land Rover has extended the shutdown of its car production for another week, as it continues to reel from a disruptive cyber attack.
JLR says it told its staff, suppliers and partners today that it has extended the current pause in our production until Wednesday 24 September.
JLR explains:
We have taken this decision as our forensic investigation of the cyber incident continues, and as we consider the different stages of the controlled restart of our global operations, which will take time.
We are very sorry for the continued disruption this incident is causing and we will continue to update as the investigation progresses.
The company’s factory lines have already been frozen for two weeks, since JLR’s manufacturing and retailing activities were “severely disrupted” by a cyber incident.
Last week, JLR revealed the hack had affected ‘some’ of its data.
The disruption is hurting the company’s suppliers; last week, the Unite union warned that thousands of workers in the JLR supply chain are at risk of losing their livelihoods, and urged the government to step in with a furlough scheme to support them.
153,000 payroll jobs lost since last year’s budget
Today’s jobs report also shows that slightly fewer jobs have been lost since Rachel Reeves’s first budget than feared.
Capital Economics’ UK economist, Ashley Webb, explains:
The 8,000 fall in payroll employment in August was the ninth monthly fall in the ten months since the October Budget. But previous revisions mean that instead of having fallen by 165,000 in total since October, payroll employment is now thought to have fallen by 153,000.
Monica George Michail, associate economist at the National Institute of Economic and Social Research (NIESR), predicts wage growth will slow further by the end of the this year:
“Today’s figures show that unemployment stands at 4.7%, its highest level in four years, and hiring momentum is rapidly slowing, with the number of jobseekers more than double the available vacancies. This suggests that wage growth will likely continue to fall, approaching 4% by year-end, according to our forecast.
A moderation in pay growth would keep the door open for further interest rate cuts by the Bank of England, after a prolonged period of elevated wage pressures.
On the fiscal front, rising unemployment will likely deter the Chancellor from further raising taxes on businesses in the next budget to avoid weighing on growth”.
Unemployment could soon hit 5%, fears Suren Thiru, economics director at ICAEW (The Institute of Chartered Accountants in England and Wales).
“These figures suggest that the UK’s jobs market is wilting under the weight of a stagnating economy and skyrocketing staffing costs as more businesses look to shrink their workforce in response to these twin headwinds.
While the pace at which pay growth is slowing remains painfully pedestrian, its current downward trajectory should gather momentum over the autumn as the eyewatering financial squeeze on businesses takes its toll on pay awards.
The UK’s labour market is likely to encounter more adverse turbulence in the coming months as surging costs for businesses and weaker customer demand amid a slowing economy could mean the unemployment rate soon tops 5%.”
UK unemployment rate still at four-year high
The UK’s jobless rate has stuck at a four-year high in the last quarter.
The unemployment rate stuck at 4.7% in May-July, the Office for National Statistics reports, for the third month in a row.
That’s up from 4.6% in February-April (the previous quarter).
As this chart shows, unemployment hadn’t been that high since April-June 2021.
UK wage growth slows as jobs market cools
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Wage growth across Great Britain has slowed, as the jobs market cools and companie cut jobs.
The latest labour market data, just released, shows that annual growth in employees’ average earnings (excluding bonuses) slowed to 4.8% in May-July this year, down from 5% a month earlier.
With inflation rising in recent months (to 3.8% in July), this slowdown in earnings means households will be squeezed harder by the cost of living.
Pay rose faster in the public sector – up 5.6% per year – compared with 4.7% for the private sector, the Office for National Statistics reports.
The ONS also flags that company payrolls shrank, by an estimated 142,000 in the year between July 2024 and July 2025, a sign that companies have been cutting back on hiring due to economic uncertainty and the rise in employers’ national insurance rates.
The estimated number of vacancies in the UK fell by 10,000 to 728,000, in June to August, today’s data shows. That’s the 38th consecutive quarterly fall.
ONS director of economic statistics Liz McKeown says:
“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.
“This weakness is reflected in a slight increase on the quarter in the unemployment rate. The number of vacancies also fell on the quarter, though the rate of decline appears to be slowing.
“Wage growth excluding bonuses edged down further in cash terms, though it remains strong by historic standards.”
Also coming up today….
Chancellor Rachel Reeves will host bosses of top US and UK financial firms in Downing Street on Tuesday morning as the government tries to highlight economic ties between the two countries at the start of Trump’s state visit.
The meeting, which will be jointly hosted by US Treasury Secretary Scott Bessent, will see senior bosses from BlackRock, Barclays and Blackstone gather in Whitehall as the chancellor seeks to secure further foreign investment that could help spur growth, and deliver positive headlines ahead of a challenging autumn budget in November.
The agenda
-
7am BST: UK labour market data
-
8am BST: Worldpanel’s UK supermarket inflation data
-
11am BST: Israel’s Q2 GDP report
-
1.30pm BST: US retail sales for August
-
2.15pm BST: US industrial production data for August
-
3pm BST: Parliament’s science committee to examine Merck’s decision to abandon the expansion of its UK operations.
