UK jobs market cools as vacancies fall and pay growth slows

ONS data shows unemployment steady but vacancies fall and pay growth slows, signaling a cooling labour market.

UK employers curb bonuses and hiring amid slower jobs market

Unemployment remained steady at 4.7% in the three months to June, while pay growth including bonuses slowed to 4.6%. The vacancy rate fell by 44,000, a drop of more than 5% from the prior quarter, marking the 37th consecutive decline and bringing vacancies to 718,000, well below pre-pandemic levels.

The ONS said the figures suggest some firms may not be recruiting or replacing staff who have left. Earlier data showed unemployment at 4.7% in the three months to May, with pay growth easing from 5.3% to 5%. Analysts note higher employer National Insurance contributions and other costs are weighing on hiring, and surveys point to fewer job postings as firms brace for a weaker outlook. A separate KPMG and REC report shows recruitment falling in July, while more graduates and workers returning to the labor pool have kept the candidate supply relatively high relative to openings.

The slowdown in vacancies and wage growth paints a picture of a cautious economy. Firms are prioritizing cost control and productivity over expansion, even as low unemployment hides underlying fatigue in the labor market. The Bank of England has already eased policy once, and the data suggest it is unlikely to cut again soon unless hiring and pay stabilize at lower levels. For policymakers, the challenge is to balance support for households with the risk of fueling inflation or delaying a broader recovery. For workers, the shift means less job security and more negotiation power for pay and benefits remains limited.

Highlights

Policy choices this autumn will shape the next phase of Britain's jobs market.