The recent data from the Office for National Statistics (ONS) shows a slight slowdown in wage growth across the UK during the summer months. Wage growth averaged 4.7% in the three months leading up to August, down from 4.8% in July. At the same time, the unemployment rate ticked up from 4.7% to 4.8%.
Job Market Trends
Analysts report that these trends indicate a stabilizing job market after a year rife with fluctuations. Job vacancies saw a decline of 9,000, or 1.3%, in the three months up to September. This marks the 39th consecutive quarter in which job openings fell compared to the previous three months.
Insights from the ONS
Liz McKeown, the ONS’s director of economic statistics, emphasized that after a long stretch of weak hiring, there are signs of stabilization. The increase in unemployment appears to mainly affect younger demographics. Although there was a quarterly decrease in individuals who were economically inactive due to study or retirement, this was offset by rising inactivity attributed to long-term illness and other factors.
The ONS urges caution when interpreting unemployment rates and is undertaking additional measures to enhance data quality. In terms of private sector earnings, growth is the slowest observed in four years yet remains above inflation.
Detailed Earnings Growth
- Public sector annual earnings growth: 6%
- Private sector annual earnings growth: 4.4%
Economist Ashley Webb from Capital Economics warned that persistent wage growth might hinder the Bank of England from reducing interest rates this year. He anticipates that a loosening labor market may soon lead to a more noticeable decline in wage growth, potentially enabling rate cuts.
Meanwhile, Chris Hare, a senior economist at HSBC, described the labor market data as indicating steady demand. However, the current conditions suggest a gradual easing of broader cost pressures and wage growth in the labor market.
Sector-Specific Insights
The public sector’s annual growth reflects certain pay increases being disbursed earlier in 2025. Meanwhile, the wholesaling, retailing, hotels, and restaurant sectors reported the highest regular annual growth rates.
Redundancy Rates and Real Wage Growth
In terms of job security, redundancies rose significantly—from 3.8 per 1,000 employees recorded between June and August compared to the previous year. Notably, the ONS revised last quarter’s wage growth figure from 4.7% to 4.8%, a vital element for future calculations of state pension increases under the triple lock policy.
- Current inflation rate: 3.8%
- Real wage growth: 0.9%
Responses from the Liberal Democrats highlight concerns about real wage growth barely keeping pace with inflation, while the Resolution Foundation called it “paltry.” Economist Charlie McCurdy pointed out that minimal increases in real wages—just £1.50 since last September—barely suffice to meet rising living costs.
He warned that the combination of a weak jobs market and sustained high inflation may heighten cost-of-living pressures as autumn approaches. Overall, the data underscores a complex landscape of wage growth and labor market dynamics in the UK.
