Fresh labour-market data reveal a continued softening in UK employment demand, even as wage pressures linger. HM Revenue and Customs’ provisional August payroll estimate showed payrolled employment drop by 26,000 from July, with July’s decline revised upward from 13,000 to 19,000. On a year-on-year basis, payrolls fell by 145,000, a sharper contraction than the 101,000 decline recorded in July. The claimant count also ticked up to 1.692 million, underscoring growing employer caution.
The household survey presented a less stark, though older, picture. Over the three months to July, the employment rate held steady at 75.1%, while unemployment remained at 4.9%, slightly below the 5.0% market consensus. Economic inactivity nudged down to 20.9% from 21.0%. Meanwhile, vacancies covering June–August fell to 702,000 from 710,000 in the prior period, their lowest level outside the pandemic since 2014. With ongoing questions surrounding the Labour Force Survey, the more timely payroll and vacancy figures offer the clearest signal of weakening demand.
Wage growth, however, has not eased in step. Annual regular earnings growth held at 3.5% for a fifth straight rolling period in the three months to July, while total earnings growth decelerated from 4.2% to 3.9%. Private-sector regular pay rose 2.9%, compared with 6.3% in the public sector, partly reflecting the timing of pay awards. The overall pattern points to a labour market weakening through employment before wages: August payroll losses and the June–August vacancy decline signal softer hiring, yet May–July earnings data have not yet shown a comparable loss of momentum.
Key Data
| Indicator | Latest | Previous |
|---|---|---|
| Payrolled employment m/m | -26,000 | -19,000 |
| Payrolled employment y/y | -145,000 | -101,000 |
| Unemployment rate | 4.9% | 4.9% |
| Employment rate | 75.1% | 75.1% |
| Economic inactivity rate | 20.9% | 21.0% |
| Vacancies | 702,000 | 710,000 |
| Regular earnings growth | 3.5% | 3.5% |
| Total earnings growth | 3.9% | 4.2% |
| Private-sector total earnings | 3.2% | 3.7% |
| Real regular earnings growth | 0.6% | 0.6% |
Key Takeaways
- Payrolled employment fell by 26,000 in August, following a July decline revised from 13,000 to 19,000.
- The annual payroll drop widened from 101,000 to 145,000, confirming a continued deterioration in headcount.
- Unemployment held at 4.9%, below the 5.0% consensus, though the ONS warned that survey improvements may be temporarily boosting measured employment.
- Vacancies declined from 710,000 to 702,000, their lowest level outside the pandemic since 2014.
- The Claimant Count rose to 1.692 million and has been climbing since January; the precise monthly change was not provided in the headline release.
- Regular earnings growth remained steady at 3.5%, while total earnings growth slowed from 4.2% to 3.9%.
- Private-sector total pay growth slipped from 3.7% to 3.2%, with public-sector strength partly distorted by the earlier timing of NHS pay awards.
- Real regular earnings growth stayed positive at 0.6%, indicating that softer employment demand has not yet erased real-income gains.
- The dominant signal is weaker employment before weaker wages: employers are cutting payrolls and vacancies, but regular pay growth has yet to lose steam.
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