Wage growth slowed and unemployment edged higher in the three months to August, as the UK labour market softened during the summer.
Average growth in employee’s average regular earnings (excluding bonuses) fell slightly to 4.7%, down from a reading of 4.8% in the three months to June, according the Office for National Statistics (ONS).
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Overall, wages are continuing to rise faster than inflation despite price growth being stubbornly high so far in 2024, coming in at 3.8% in August. Regular earnings outpaced inflation by 0.9 percentage points in the three months to August, while total earnings outpaced it by 1.2 percentage points.
Different rates of wage growth also exist in the public and private sectors. Workers paid by the government saw average regular earnings rise by 6% in the three months to August, while private sector wage growth was just 4.4%.
The ONS clarifies that some public sector pay rises were paid earlier in 2025 than in 2024, meaning annual comparisons will be skewed.
Wage growth was the fastest in the three months to August in the public sector, but the wholesaling, retailing, hotels and restaurants sectors also showed strong regular wage growth.
Youth joblessness driving unemployment rate
Alongside slowing wage growth, the ONS reports that unemployment rose to 4.8% in the three months to August, up from 4.7% in the three months to July.
In turn, the UK employment rate fell to 75.1% in the three months to August, down from 75.2% in the previous period.
The UK has not seen unemployment this high since May 2021, when the country was still under Covid-19 restrictions.
The unemployment rate rising over the summer came largely from a rise in joblessness among the young, Liz McKeown, director of economic statistics at the ONS, said.
“After a long period of weak hiring activity, there are signs that the falls we have seen in both payroll numbers and vacancies are now levelling off. We see different patterns across the age ranges with record numbers of over-65s in work, while the increase in unemployment was driven mostly by younger people.”
Meanwhile, the estimated number of vacancies in the UK fell by 9,000 (1.3%) in the three months to September 2025, the 39th consecutive period where vacancies have dropped.
The latest data continues to show the impact that the government’s rise in employer’s National Insurance contributions (NICS) has had on the labour market, as firms face higher costs.
Danni Hewson, head of financial analysis at AJ Bell, said: “Businesses warned that changes made to National Insurance in last year’s Budget would force them to reconsider who and how many people they employ. Raising the threshold at which National Insurance was paid made it more expensive for employers who had lots of part-time staff, many of them being younger workers dipping their toe in the labour market for the first time.”
Hewson adds that the ONS’s observation that unemployment rose among the young “suggests those warnings have become reality”.
She said: “Those first jobs waiting on tables, stocking shelves at local corner shops and spending Saturdays putting discarded clothing back on hangers provide young people with a chance to develop a work ethic, gain experience and earn a bit of cash that belongs to them. Making it harder to find these types of jobs could have a marked impact on their relationship with work in the future.”
This view is echoed by Daisy Cooper, Liberal Democrat Treasury spokesperson, who said: “The chancellor's jobs tax has left the Government up a creek without a paddle, snuffing out growth in our high streets and for small businesses, keeping people out of work and increasing the benefits bill even further.”
“This approach cannot continue while jobs are lost and shops shutter. The chancellor must take the handbrake off our economy and go for growth,” she added.
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