Wage growth in the UK slowed slightly over the summer while unemployment edged up, signalling a cooling jobs market after months of volatility.
According to new data from the Office for National Statistics (ONS), average pay grew by 4.7% in the three months to August, down marginally from 4.8% in the previous quarter. The national unemployment rate also rose from 4.7% to 4.8%.
Analysts said the figures suggest the labour market is beginning to stabilise following a turbulent year. Job vacancies fell by 9,000, or 1.3%, marking the 39th consecutive quarterly decline in openings.
Liz McKeown, ONS director of economic statistics, said: “After a long period of weak hiring activity, there are signs that the falls we have seen in both payroll numbers and vacancies are now levelling off.” She added that the rise in unemployment was driven mainly by younger workers.
While there was a decline in economic inactivity among students and retirees, it was offset by an increase in those inactive due to long-term illness or other reasons.
Danni Hewson, head of financial analysis at AJ Bell, said the data paints “a clearer picture of a labour market that’s soft, with younger workers facing the biggest challenges.” She noted that Chancellor Rachel Reeves’ decision to raise employer national insurance contributions has made it “more expensive for employers who have lots of part-time staff,” many of whom are young people entering the workforce.
“The fact the ONS has found that the rise in unemployment in the three months to August was driven mostly by younger people suggests those warnings have become reality,” Hewson added.
Annual wage growth reached 6% in the public sector and 4.4% in the private sector, the lowest private-sector increase in four years but still slightly ahead of inflation. The ONS noted that the higher public-sector figure reflects some pay rises being brought forward into early 2025.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Finding a job is more of an uphill task with each passing month. For those in work, meanwhile, wages are now rising only a fraction ahead of inflation.”
Economists said the latest data suggests a “steady” jobs market, with Chris Hare, senior UK economist at HSBC, telling BBC Radio that there is “fairly soft demand for labour,” which could ease broader cost pressures.
The redundancy rate increased slightly to 3.8 per 1,000 employees between June and August. The ONS also revised wage growth data upward from 4.7% to 4.8%, a figure likely to be used to calculate next year’s state pension increase under the triple lock system.
With inflation currently at 3.8%, real wage growth stood at just 0.9%. The Resolution Foundation described this as “paltry,” noting that real weekly wages have risen by only £1.50 since last year — “barely enough to cover the cost of a Greggs sausage roll.”
Economist Charlie McCurdy warned that “the deteriorating labour market, coupled with persistently high inflation, means that cost of living pressures are likely to build over the autumn.”
