The UK unemployment rate fell to 4.7% in the three months to August, beating forecasts and providing a boost ahead of the government's budget announcement. The Office for National Statistics said the rate dropped from 4.9% the previous month, confounding City economists who had predicted it would rise to 5%. Employment increased by 102,000 jobs to reach 34.577 million in the last quarter, while the number of unemployed people fell by 47,000 to 1.712 million.
The labour market data offers a positive picture for Chancellor John Healey with the budget just two weeks away. The Office for National Statistics also reported a slight decline in economic inactivity, down 16,000 to 9.091 million. However, the employment gains came against a backdrop of weakness in job creation, with vacancy numbers continuing their downward trajectory.
The number of available vacancies fell by 21,000 in the last quarter, marking the largest quarterly decline since the start of the year. According to the Office for National Statistics, vacancies dropped to 691,000 in the three months to September, down sharply from over 1.2 million in early 2022. This represents the first time the vacancy total has fallen below 700,000 since February to April 2021, indicating a significant tightening in the jobs market.
The contraction in vacancies is particularly pronounced among smaller businesses, which have signalled they may not be recruiting owing to increased labour costs. These higher expenses stem from the rise in employer National Insurance Contributions introduced by former Chancellor Rachel Reeves and increases to the minimum wage, both of which have raised the cost of hiring staff.
For UK workers, borrowers and investors, the falling unemployment rate offers some positive signals on the economy, though the sharp drop in available vacancies suggests fewer opportunities for those seeking employment and may indicate weakening demand from employers.