The UK's unemployment rate fell to 4.7% in the three months to August, the lowest level in more than a year, even as the number of job vacancies continued to decline for another month, according to new figures from the Office for National Statistics (ONS).
The rate dropped from 4.9% in the three months to July, marking an unexpected decline and the lowest level since the three months to July 2025.
Payroll Numbers Show Tentative Reversal
More timely data suggests that workers on payrolls increased by about 13,000 between August and September, up from a revised increase of 1,000 between July and August. This marks a reversal after several months of declining employee numbers, but the ONS stressed that the data was provisional and likely to be revised.
The ONS's data also showed a boost for average wage growth across the UK workforce. Average regular earnings growth rose to 3.7% in the three months to August, from 3.5% growth in the three months to July. Pay continues to outstrip inflation, rising by 0.8% after taking Consumer Prices Index (CPI) inflation into account.
Vacancies Hit Fresh Low
However, total earnings growth, which includes bonuses, fell to 3.7% in the three months to August, the lowest rate in nearly six years.
Furthermore, the latest dataset shows that the number of job vacancies advertised by employers continued to shrink, with smaller firms particularly pulling back on hiring. Vacancies fell by 21,000 to a fresh five-year low of 691,000 in the three months to September, according to the ONS's estimates. This marked the biggest decline since the start of the year.
Economists React to Stabilising Market
ONS deputy director of labour market statistics, David Freeman, said: “While the labour market remains broadly flat in 2026, data from the latest quarter shows the employment rate edging up and a small drop in unemployment.” He added that the number of workers on payroll remains slightly down over the same period, though data for the most recent month suggests that might be starting to level off. Freeman noted that the number of vacancies has seen its largest fall since the start of the year, concentrated mainly within smaller businesses, which cite increased labour costs as a key factor, and that regular wage growth remained relatively stable, though total pay – including bonuses – has eased to its lowest rate in nearly six years.
Sanjay Raja, chief UK economist for Deutsche Bank, said signs that the UK jobs market is stabilising is “good news” for Chancellor John Healey. “Firms are slowing coming out of the woods as pertains to hiring, and more workers will mean more tax receipts,” he said.
James Smith, developed markets economist for ING, said: “After a long period of attrition, there are tentative signs that employment is stabilising.” He noted that hospitality – a key area of weakness – recorded a small increase for the first time in months, having been hammered by last year’s combination of a big minimum wage hike and tax increases. “These figures are prone to a fair bit of revision, but it does tally with the signal coming from some of the hiring surveys that employment is starting to turn a corner.”
However, experts said the latest data reinforces expectations that the Bank of England could hike interest rates in November. Thomas Pugh, chief economist at RSM UK, said: “For the Bank of England, the stronger economy and stabilising labour market means there is no longer a trade-off between low growth and high inflation. This morning’s data means an interest rate hike in November now looks exceedingly likely and will probably be followed by at least one more next year.”
