The UK labour market showed signs of cooling in the summer as the number of payrolled employees and advertised vacancies declined, while central government and National Health Service staffing reached record levels, official figures published Tuesday showed.
The Office for National Statistics reported that unemployment was unchanged at 4.7 percent for the three months to July, but the number of payrolled workers fell by 8,000 in August and vacancies were down 10,000 over the quarter to August. Regular pay growth excluding bonuses slowed to 4.8 percent in the three months to July from 5.0 percent in the previous quarter — the slowest rate since May 2022 — though wages remained above consumer price inflation by 1.2 percentage points.
The ONS said central government employment was estimated at about 4.04 million in June, an increase of roughly 95,000 since Labour took office, and that approximately 2.07 million of those posts were in the NHS, which grew by about 42,000 over the year.
Liz McKeown, director of economic statistics at the ONS, said the data pointed to a cooling market: "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. The number of vacancies also fell on the quarter, though the rate of decline appears to be slowing."
The ONS figures reflect a divergence between public and private employment trends. While central government and health-sector staffing have continued to expand since the change of government, private-sector employers signalled constrained hiring after national insurance and minimum wage increases, contributing to the slowdown in pay growth and the fall in payroll employment.
Business groups have warned Labour officials against what they described as the risk of further tax increases in the upcoming Budget, arguing that firms were already scaling back recruitment. The reports have become a focal point in domestic political debate over the government’s fiscal plans and the balance between public-sector expansion and private-sector growth.
The data cover several different periods: unemployment for the three months to July, regular pay for the same period, payrolled employment through August, and central government staffing estimates for June. Vacancies fell on a quarterly basis to August, and the slowdown in regular pay growth compared with the previous three months was the lowest since mid-2022.
Although these figures are specific to the United Kingdom, labour-market developments in major economies are routinely watched abroad. Policymakers and markets in the United States and elsewhere monitor such data for signals about global inflationary pressures and potential implications for interest-rate expectations.
The ONS release follows a period of intense scrutiny of UK fiscal policy and labour-market outcomes, and it will feed into assessments by independent forecasters, the Bank of England and market participants as they reassess growth and inflation prospects. The government will face pressure to explain how it intends to reconcile rising public-sector headcounts with signs of private-sector cooling ahead of the autumn Budget.
The ONS figures were released amid wider debate over the pace and composition of the post-election public-sector expansion and its effects on private employment and wage dynamics. Analysts and officials will examine subsequent monthly releases to determine whether the recent falls in payroll employment and vacancies represent a temporary adjustment or the start of a more sustained cooling in the labour market.