The Office for National Statistics (ONS) reported that job vacancies in the UK fell by 7,000 in the three months to June, reaching 712,000. This decline was primarily driven by small businesses, which reduced hiring due to rising costs and higher wage bills.
Private Sector Wage Growth Drops Below 3%
Regular average wage growth in the private sector fell to 2.9% in the three months to May, the first time it has been below 3% since 2020. This is down from an upwardly revised 3% in the previous quarter. The ONS attributed the decline to smaller firms facing increased labour and operating costs.
Unemployment Rate Steady at 4.9%
Despite the drop in vacancies, the UK's overall unemployment rate remained unchanged at 4.9% in the three months to May. The number of workers on UK payrolls fell by 4,000 between May and June, a smaller decline than expected, to 30.3 million.
Public Sector Wage Growth Boosts Overall Figures
Overall regular wage growth remained steady at 3.4% in the quarter to May, supported by a 5.5% increase in the public sector. The ONS noted that this was affected by the timing of recent NHS pay awards. Regular earnings continued to outstrip inflation, rising 0.4% when adjusted for the Consumer Prices Index.
Expert Analysis and Future Outlook
Liz McKeown, ONS director of economic statistics, said: “The latest data show a relatively steady labour market picture overall, though some measures continue to suggest softening. Vacancies fell again over the quarter, but by less than in recent periods. The latest decrease was driven mainly by smaller businesses, where labour and operating costs were cited as factors in not taking on new staff.”
Matt Swannell, chief economic adviser to the Item Club, commented: “There are some signs that the deterioration in the labour market has bottomed out. But we think this will prove a temporary respite, and with a sustained reduction in the use of Strait of Hormuz looking increasingly likely, we expect high energy prices to weigh on growth and the jobs market.”
Thomas Pugh, chief economist at RSM UK, added: “A stale labour market that is still gradually loosening gives the Monetary Policy Committee space to keep interest rates on hold next week. Unless oil prices rise back above 100 US dollars a barrel, we expect the committee to keep rates on hold for the rest of the year before resuming its downward trend in 2027.”
The ONS figures will be closely watched by policymakers at the Bank of England ahead of its interest rate decision on July 30.
