UK jobs market cools as vacancies fall

New ONS data show vacancies and payrolls falling as wage growth holds steady, signaling a gradual cooling in the labor market.

UK jobs market cools as vacancies fall

The Office for National Statistics reports a 5.8% drop in job vacancies to 718,000 between May and July across most industries. Payroll numbers fell by 8,000 from June to July, while the unemployment rate remained at 4.7% and wage growth stayed at 5%. The ONS cautioned that payroll figures can be noisy, and data quality is under review as it adapts its methods. Experts said the scale of the decline is modest and reflects a softer hiring landscape rather than a sharp collapse.

Policy changes this year, including the National Living Wage rising to 12.21 and the employer national insurance contribution increasing to 15%, have raised costs for businesses. Yet analysts argue the effect is not as severe as earlier feared, with some seeing a pause in the fall as the economy adjusts. Officials and economists noted that a slow easing in vacancies could feed into slower wage growth over time, a factor the Bank of England will weigh when considering rate moves.

The data show a labour market that is cooling but not breaking. Vacancies are at their lowest since early 2021 outside the pandemic era, and payroll declines are uneven across sectors, especially hospitality and retail. This points to structural shifts in hiring, not a sudden shock. The political debate around taxes and the minimum wage adds fuel to the interpretation that policy settings are affecting hiring costs, even as inflation pressures linger. In the coming months, wage dynamics and Dr BoE actions will hinge on how much slack remains in the economy and whether data quality improves enough to give policymakers clearer signals.

Highlights

Policy watchers will gauge how much longer this soft landing lasts as data and rates move in step.