Employment and HR organisations have warned that weak hiring, falling vacancies, and persistently high youth unemployment are becoming entrenched features of the UK labour market after the latest official figures showed little movement in headline employment measures.
Office for National Statistics data published on Tuesday showed an estimated 30.2m payrolled employees in August 2026, down 145,000 from a year earlier and 26,000 from July. The estimate is provisional and subject to revision as further payroll data becomes available.
The number of job vacancies fell by 8,000 to 702,000 in the three months to August, extending a decline that has taken openings to their lowest level since 2021. Private-sector regular pay growth also eased to 2.9% in the three months to July, while the wider employment, unemployment, and economic inactivity rates showed comparatively little quarterly movement.
The figures prompted employment specialists to focus on the continued reduction in opportunities available to jobseekers, particularly young people, and on the pressures discouraging employers from adding staff.
Naomi Clayton, Chief Executive at the Institute for Employment Studies, said: “The UK labour market remains flat. There has been little movement in the headline employment, unemployment and inactivity rates over the last quarter. Payrolled employment continues to fall, with the largest falls in the last quarter in retail and hospitality. Vacancies have also continued to fall and are at their lowest level since 2021. Beneath the headlines, youth unemployment remains at its highest rate in more than a decade. With the Alan Milburn review due to report on solutions, our research emphasises the importance of investing in trusted relationships, tailored support and effective pathways for young people to improve long-term employment outcomes.”
The fall in vacancies is particularly significant after the labour shortages that characterised parts of the post-pandemic economy. Demand for workers rose sharply as businesses reopened, but hiring conditions have gradually weakened as employers contend with wage costs, broader operating expenses, and subdued confidence.
James Cockett, senior labour market economist for the CIPD, the professional body for HR and people development, said: “Today’s figures lay bare just how challenging conditions have become for employers. Overall vacancies have fallen to 700,000, with the level among small employers now 50% lower than the post pandemic peak in 2022. Many firms, and SMEs in particular, are holding back from hiring because of higher labour and wider operating costs.
“Our forward-looking data shows employer confidence on hiring intentions at a record low and points to more of the same in the months ahead. This highlights the need for Government to work in partnership with employers and take steps to create a more positive business environment that can support jobs and growth.
“The ONS data continues to highlight the scale of the NEET crisis with the unemployment rate among 16-17-year-olds currently recorded as 34%. Now is the time for bold action to improve access to work and training opportunities for young people. The Milburn Review, expected in the coming weeks, should back the CIPD’s call for an Apprenticeship Guarantee for 16 to 17-year-olds. This would help create 20,000 additional apprenticeship places and open more routes into skilled employment. Reversing the reduction in the secondary NICs threshold and putting the equalisation of the adult and youth minimum rates on hold, would also help to address the significant numbers of NEETs by easing cost pressures on employers.
“Another way the Government can support job creation is by compromising on its proposed reforms to zero- and low-hours contracts to avoid further reducing employment opportunities, particularly for young people. Unless the proposed measures can be made workable, employers won’t respond by moving zero-hours staff onto guaranteed hours, they will simply take on fewer of them.”
The CIPD recommendations are policy proposals from the professional body rather than measures adopted by government. They arrive as policymakers consider how to improve routes into employment for young people and await recommendations from the Milburn Review.
The deterioration in vacancies adds another dimension to the UK’s mixed economic picture. Output increased by 0.4% in July, as recent UK growth figures showed, while labour-market indicators continue to point to caution among employers.
A lower-vacancy environment can ease some of the recruitment difficulties companies experienced after the pandemic, but sustained weakness also indicates less appetite to expand headcount. That affects recruitment businesses, training providers, employers planning future skills pipelines, and workers seeking to enter or change roles.
Youth employment is an increasingly prominent pressure point. When entry-level opportunities contract, young people can find it harder to accumulate experience and skills, while businesses risk narrowing the pipeline from which they expect to recruit in future years.
The next phase of the labour-market debate will centre on whether weaker hiring becomes persistent and what interventions follow. Employers are balancing labour costs and recruitment needs while policymakers seek to increase employment participation and improve routes into work, leaving the forthcoming Milburn Review to report against a markedly cooler jobs market.
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