The UK's jobless rate fell to 4.7% in the three months to August, down from 4.9%, according to the Office for National Statistics, confounding City economists who had forecast a rise to 5%. The figures provide a boost ahead of Chancellor John Healey's first budget next week. Payrolled employees also rose by 13,000 between August and September to reach 30.3 million, the ONS said.
The employment picture is less encouraging below the surface. Job vacancies fell by 21,000 to 691,000 in the three months to September, marking the lowest level since 2021 during the Covid pandemic and the weakest position in over 12 years outside that period, according to ONS data. Ben Harrison, director of the Work Foundation thinktank at Lancaster University, cautioned against optimism. He said: "The UK is still amidst a jobs drought with vacancies at their lowest for over 12 years outside of the pandemic." Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, described the labour market as "running on idle" with employers limiting recruitment and pay awards.
Young people remain a concern for policymakers. The ONS estimated 715,000 unemployed young people aged 16 to 24, down 28,000 on the quarter. However, Harrison noted this figure remains 54,000 higher than 12 months ago. Work and Pensions Secretary Pat McFadden acknowledged the challenge, saying: "Many young people need support to enter the labour market" and that the government is working with industry "to bring young people back into the labour market and prevent them from drifting into the welfare system."
Wage data presented a mixed picture. Excluding bonuses, average pay growth rose to 3.7% from 3.6%, but when bonuses are included the rate fell to 3.7% from 3.9%, indicating fewer bonuses were paid to workers. Pay growth remains above the 3.1% inflation rate recorded in August, which is expected to rise to 3.4% when September figures are published. The Bank of England is widely expected to raise interest rates in response, with financial markets pricing in rates between 4.75% and 5% by mid-2027, though Capital Economics suggested the central bank would probably cap rates at 4.25%.
The pound rose against the dollar following the figures, gaining about half a cent to 1.3352 dollars.