Britain’s labour market continued to lose momentum during the second quarter as vacancies fell to 707,000, private-sector pay growth slowed to its weakest rate since late 2020, and the unemployment rate remained at 4.9%.
Office for National Statistics figures show the number of available jobs falling again in the three months to July. Vacancies are now at their lowest level since the pandemic period and, excluding that disruption, around levels last seen more than a decade ago.
The data adds to evidence that employers are becoming more selective about recruitment even as the overall employment picture remains relatively stable. The employment rate for people aged 16 to 64 was estimated at 75.1% in the three months to June, up slightly on the previous quarter but 0.2 percentage points lower than a year earlier.
Payroll figures point in the same direction. The number of payrolled employees fell by 78,000 over the year to June and by 37,000 across the comparable April-to-June quarter. A provisional estimate for July showed another monthly decline of 13,000.
Wage data also revealed an increasingly pronounced divide between the public and private sectors. Regular private-sector earnings increased by 2.8% year on year in the three months to June, the weakest growth since the three months to October 2020. Public-sector pay rose by 6.1%, partly reflecting the timing of NHS pay awards.
Total regular pay growth across the economy stood at 3.5%, while total earnings including bonuses grew by 4.1%.
Liz McKeown, director of economic statistics at the ONS, said the figures showed “some softening” in the jobs market, although the broader picture remained relatively steady.
The official numbers sit alongside a more uneven picture from recruitment companies. Recruitment-industry data published by BQ last week showed permanent placements stabilising after 45 consecutive months of decline, while temporary billings continued to expand.
The two datasets measure different parts of the market. Recruitment surveys can capture changes in hiring activity before they become visible in official employment totals, while the ONS vacancy series covers a much broader section of the economy. Together, they suggest that labour-market deterioration is no longer occurring at the pace seen earlier in the cycle, although employers remain cautious about adding permanent headcount.
That caution is increasingly relevant to wage pressure and interest-rate expectations. The Bank of England monitors private-sector pay closely because sustained wage growth can feed domestic inflation, particularly across labour-intensive service industries. The slowdown to 2.8% reduces one source of pressure even as policymakers continue to assess higher energy costs and other externally driven inflation risks.
A softer market does not automatically make recruitment easy. Recent hiring surveys continue to show shortages in specialist technology, finance, engineering, healthcare, and other skilled roles. A larger pool of available candidates can coexist with persistent shortages where experience or technical capability is limited.
The ONS estimates there were 2.5 unemployed people for every vacancy in April to June, up from 2.3 a year earlier. That ratio has remained at 2.5 since the middle of 2025, suggesting that the balance between labour demand and available workers has shifted materially from the unusually tight conditions that followed the pandemic.
The longer-term direction is also changing workforce planning. Businesses that spent much of the post-pandemic period competing aggressively for labour are operating with greater choice, but also against weaker demand and tighter cost controls. Recruitment decisions are increasingly concentrated around roles tied directly to productivity, revenue, risk, or transformation rather than broad headcount expansion.
The decline in vacancies also increases the value of workforce retention. Slower external hiring can make internal development, reskilling, and redeployment more important where companies need to fill capability gaps without materially increasing payroll costs.
The ONS continues to advise caution around short-term changes in Labour Force Survey estimates and recommends reading them alongside payroll, claimant-count, and workforce-jobs data. That qualification remains relevant while survey methodology continues to evolve.
Across those measures, however, the direction is becoming more consistent. Employment remains relatively resilient, but vacancies are declining, payroll growth is weak, and private-sector pay pressure is easing. The next test will come as employers enter the autumn budgeting and hiring cycle.
You must be logged in to post a comment.