Is the UK labour market steadying?
Official figures show wage growth is decelerating, but redundancies fell to their lowest level in nearly a year.
UK labour market figures held steady during June compared to the previous month, but have fallen over the past year, latest figures from the Office for National Statistics (ONS) show.
The UK’s jobless rate remained at 4.9% – higher than optimal, but indicative of a degree of stabilisation.
Wage growth came in at 3.4% for regular pay (excluding bonuses) for the period from March to May 2026, compared to the same period the previous year. For total pay (including bonuses) average wages grew 4.3%.
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This continues a trend of slowing UK wage growth that will be comforting to the Bank of England, since it suggests an easing of earnings pressure on UK inflation.
Accounting for inflation, regular wages grew 0.3% and total pay increased 1.3%.
“The latest data show a relatively steady labour market picture overall, though some measures continue to suggest softening,” said Liz McKeown, director of economic statistics at ONS. “The number of employees on payroll was broadly flat in the latest month, while survey estimates suggest employment, unemployment and inactivity rates were little changed in the latest quarter.”
Regular earnings in the private sector grew at 2.9% between March and May – the first time it has dipped below 3% since 2020.
What’s happening to UK job numbers?
As with wage growth, there were signs of both fragility and increasing stability in the UK jobs market when it came to job numbers.
The number of jobs fell by around 4,000 during the course of the month, and fell by 71,000 (0.2%) over the preceding year.
“There’s a glass half-full story, however,” said Sanjary Raja, chief UK economist at Deutsche Bank. “We are seeing some tentative signs of stabilisation. Indeed, the vacancy data also showed an increase in job advertisements for the first time since December.”
Redundancies also appear to be falling, dropping to 108,000 in the three months to May – the lowest reading for this figure since July 2025.
New vacancies, however, also fell. Early estimates from the ONS suggest there were 7,000 (0.9%) fewer vacancies in April-June 2026 compared to January-March.
“Vacancies fell again over the quarter, but by less than in recent periods,” said the ONS’s McKeown. “The latest decrease was driven mainly by smaller businesses, where labour and operating costs were cited as factors in not taking on new staff.”
What does the UK labour market data mean for interest rates?
Labour market data will be looked at closely by the Bank of England’s Monetary Policy Committee (MPC) when it next meets to decide on UK interest rates, along with inflation data – the next release of which is due 22 July, the day after UK labour market data was released.
“For the Bank of England, the continued slowdown in wage growth will be comforting in its fight to get inflation back to target,” said Deutsche Bank’s Raja.
“Provided Middle East tensions do not escalate much further, this should allow the MPC to remain on the sidelines for the rest of the year.”
The fact that signs of labour market fragility are still visible in the latest data does, however, hamper the MPC’s ability to raise rates at its next meeting.
“Job seekers will probably face more strain over the summer, with unemployment likely to edge noticeably higher as elevated cost pressures and weakening demand increasingly inhibits hiring — especially if uncertainty over future tax policy persists,” said Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales.
“These subdued figures likely shut the door on a July interest rate rise, by fuelling hope that a softening labour market can help restrict inflation by restraining pay awards and dampening demand across the economy,” he added.
