After eight consecutive months of decline, payrolled employment increased slightly in August, according to the Office for National Statistics’ October release. The employment rate for June to August stood at 75.1 per cent, while unemployment rose to 4.8 per cent. The data indicate a labour market that may be flattening rather than falling — cooling, but with tentative signs of steadiness.
Naomi Clayton, Chief Executive at the Institute for Employment Studies, said the figures point to a slower pace of contraction. “There are early signs that the labour market is starting to stabilise, as the pace of decline in jobs is slowing,” she said. “Payrolled employment increased in August, having decreased for the previous eight months. Job vacancies are increasing in some sectors but remain well below the pre-pandemic peak and the increase in unemployment means that there are more people looking for fewer jobs.
“With record-high numbers of people still out of work due to ill health and unemployment continuing to rise, it is vital that the government scales up support for individuals and employers to boost participation, alongside measures to boost demand.”
The headline numbers support that view, with redundancies easing slightly to 3.8 per 1,000 employees, vacancies falling at a slower rate, and total pay growing by 5 per cent year on year — moderating but still ahead of inflation. The picture suggests that while hiring momentum remains weak, the worst of the downturn may have passed for now.
Yet the figures also underline one of the UK’s most persistent structural challenges: inactivity. The share of working-age adults not in employment or seeking work remains close to 21 per cent, with long-term sickness accounting for a record proportion. More than 2.8 million people are now out of the workforce due to ill health. That number has risen steadily since the pandemic and shows little sign of easing.
Economists note that this health-driven inactivity is increasingly central to understanding the labour market’s limits. Many of those affected are in mid-life, often with prior work experience and valuable skills, but face barriers to re-entry linked to chronic conditions or waiting lists. That dynamic constrains labour supply and, in turn, productivity — keeping wage pressures sticky even as job growth slows.
Some improvement is visible among older and younger groups, where participation has edged up. However, the offset is not enough to counter the continued rise in health-related absence among those aged 35 to 54. Analysts warn that without stronger return-to-work initiatives, the overall employment rate risks plateauing well below pre-pandemic norms.
The government has signalled it will expand employment support and reform health and disability assessments, but progress remains gradual. Employers, too, face a balance between managing costs and adapting workplaces for longer-term flexibility. Hybrid work arrangements, occupational health schemes, and flexible scheduling have all become part of that adjustment, though take-up varies sharply by sector.
For now, the data hint at a labour market that is cooling in a more orderly way. Slower declines in vacancies and a marginal August payroll rise offer cautious optimism. But with unemployment edging higher and participation still impaired by ill health, talk of recovery remains premature. The coming months will show whether the UK has reached a genuine plateau or simply a pause before renewed strain.
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