The UK labour market is continuing to lose momentum, with job vacancies falling and payroll numbers edging down, according to the latest figures from the Office for National Statistics (ONS).
Between May and July, job openings fell by 5.8% to 718,000 — the lowest level since April 2021, when the country was still dealing with the effects of the Covid pandemic. Outside of the pandemic period, the last time vacancies were this low was in early 2015.
The ONS reported declines across nearly all industries, with hospitality and retail seeing the sharpest drops. “The number of employees on payroll has now fallen in 10 of the last 12 months,” said Liz McKeown, ONS director of economic statistics. “Job vacancies, likewise, have continued to fall, also driven by fewer opportunities in these industries.”
The slowdown, however, has been gentler than many economists expected. The unemployment rate held steady at 4.7%, while average wage growth remained at 5%. Payroll employment fell by just 8,000 between June and July, leaving more than 30 million people still on employer payrolls.
Andrew Sentence, a former Bank of England policymaker, described the situation as a “very gradual cooling” of the jobs market.
Analysts say part of the easing reflects the impact of April’s tax and wage changes. The National Living Wage rose from £11.44 to £12.21, while employers’ National Insurance contributions increased from 13.5% to 15%, with the payment threshold lowered from £9,100 to £5,000 a year.
Ashley Webb, UK economist at Capital Economics, said the “modest fall” in payrolls suggested the pressure from higher costs was starting to stabilise. “Redundancy notices remain relatively subdued,” he added.
Not everyone is reassured. Hospitality executive Louise Maclean, of the Signature Group, said added costs since April had made profitability “just so hard,” forcing businesses to be more selective in hiring. “Older workers with experience who can hit the ground running are more attractive right now,” she told BBC Radio 4’s Today programme.
Chancellor Rachel Reeves welcomed what she called “some really positive news” but admitted “there’s more to do” to bring unemployment down. Shadow work and pensions secretary Helen Whately blamed government policy, saying Labour’s “war on business” had burdened employers with high taxes and red tape.
Despite the cooling trend, ministers say policy decisions are laying the groundwork for economic stability. Education minister Baroness Jacqui Smith pointed to the Bank of England’s recent interest rate cut as a sign the UK is “now enabling itself to move forward.”
