Wage growth continued to slow in the UK in June while the unemployment rate remained steady at 4.9% in the three months to the end of June 2026, representing a 0.3 percentage point increase from the previous year.
Figures from the Office for National Statistics (ONS) also indicated growth in total earnings – including bonuses – fell to 4.1% over the three-month period, down from 4.3% in the three months to May.
Meanwhile, job vacancies dropped and the number of workers on company payrolls fell by 13,000, while the number of those unemployed for between six to 12 months increased over the year and on the quarter.
Felix Feather, economist at Aberdeen, said the latest labour market figures point to a softening UK jobs market, in particular highlighting that regular private-sector pay growth also eased to 2.8% from 2.9% previously.
He said: “Broadly, the labour market has been loosening for some time. Hiring activity has softened, vacancies have trended lower and businesses continue to face a challenging demand environment.”
There are some examples of resilience, as the ONS reported pay growth excluding bonuses strengthened slightly from 3.4% to 3.5%.
However, David Rees, head of global economics at Schroders, said he expects the Bank of England “to keep pushing back against market expectations for rate hikes until the end of the year”.
With leading indicators of employment starting to improve from weak levels, and fiscal policy likely to turn more expansionary, Rees warned that the UK’s low level of potential GDP growth means the labour market could quickly tighten again next year.
“In that scenario, the Bank will probably be forced to raise interest rates, perhaps in the second half of 2027,” he said.
Feather also expects the Bank of England to hold rates at 3.75% for the rest of the year.
Neil Birrell, chief investment officer at Premier Miton, highlighted his particular concern that the number of job vacancies in the UK remains at a low “with no sign of picking up, which, along with weaker private sector earnings growth, could provide an insight into how corporates are seeing things”.
With the UK’s latest inflation figures also due on Wednesday 19 August, Birrell noted that “it’s a big week for UK economic data, which could test the ‘Burnham Bounce’”.
The market largely expects inflation to jump at tomorrow’s reading, due to the continued strain of spiking energy bills in the wake of the conflict in the Middle East.