The jobs market continued to stagnate over the summer, with pay growth and vacancies both falling and redundancies rising, latest official figures have shown.
Labour market
Jobs market continued to struggle during July
Call for more support for young workers, as jobs market remains challenging
The data from the Office for National Statistics (ONS) showed annual wage growth, excluding bonuses, was 4.8% in May to July. This is slightly down from the 5% reported for the previous quarter.
The figures are the latest in a slew of data over the summer showing just how challenging the recruitment market remains for employers and employees alike.
Estimates for payrolled employees in the UK fell by 142,000 between July 2024 and July 2025, and by 6,000 between June 2025 and July 2025.
The number of employees on payrolls in the three months to July fell by 125,000 from a year earlier, and by 51,000 on a three-monthly basis, said the ONS.
Early estimates for the number of payrolled employees for August 2025 were a decrease of 127,000 on the year, and 8,000 on the month, to 30.3 million, it added.
The unemployment rate for the three-month period was 4.7%, which the ONS said was up on the latest quarter and above estimates from a year ago. This had edged up from 4.6% in the previous three months.
The employment rate for people aged 16 to 64 years was estimated at 75.2% in May to July 2025. This was up on the latest quarter and above estimates of a year ago, the ONS said.
The estimated number of vacancies in the UK fell by 10,000 on the quarter, to 728,000, in June to August 2025. This, the ONS said, was the 38th consecutive period where vacancy numbers had dropped compared with the previous three months, with vacancies decreasing in nine out of 18 industry sectors.
There were an estimated 83,000 working days lost because of labour disputes across the UK in July 2025. Most were in the health and social work sector, it added.
“The labour market continues to cool, with the number of people on payroll falling again, while firms also told us there were fewer jobs in the latest period,” said the ONS director of economic statistics, Liz McKeown.
“Wage growth excluding bonuses edged down further in cash terms, though it remains strong by historic standards,” she added.
Ben Harrison, director at the think-tank The Work Foundation at Lancaster University, highlighted the ongoing challenges the government faces in turning the cooling economy around, especially as we count down to chancellor Rachel Reeves’ critical Budget in November.
“Unemployment continues to creep up. It is now at the highest level in just under four years at 4.7%, and up 194,000 on the year. Concerningly for ministers seeking to create additional pathways to work, there are now more people looking for fewer available jobs – with 2.3 jobseekers per vacancy. And the risk remains that unemployment rises further in the months ahead,” he said.
“The combination of stagnant living standards and sticky inflation means that people are still likely to feel pessimistic about their household finances one year into the new Parliament. Only half of workers (48%) believe wage increases are keeping up with the cost of living, and just 43% expect an above-inflation pay rise in the next 12 months,” he added.
‘No surprise’
Recruitment and Employment Confederation (REC) chief executive Neil Carberry said the figures came as “no surprise”.
He said: “It reflects what business surveys have been telling us. Firms were struggling with low growth and rising employment costs from national insurance to national minimum wage to energy, and from fears about the Employment Rights Bill.
“But the picture has steadied, and our members report a slightly brighter outlook for the rest of the year after a longer and tougher hiring summer slowdown than usual.
“Private sector wages are normalising, with upward pressure now driven by government choices on public sector pay and the national minimum wage. This is significant, given the impact of these figures on the costly pensions triple lock next year,” Carberry added.
Jack Kennedy, senior economist at Indeed, agreed there were “few surprises” in the figures. “There’s little in the data to shift the Monetary Policy Committee’s thinking ahead of Thursday’s interest rates decision, where policy is widely expected to remain on hold. The Bank remains stuck in a bind between weak demand and stubborn inflation pressures, meaning any rate cuts may be off the table until 2026.
“There are fewer jobs but stubborn pay pressures – and a policy headache that won’t go away,” Kennedy added.
Stagnant labour market
Michael Stull, managing director at ManpowerGroup UK, said: “This is not a regular boom-bust cycle but a slow, steady march towards a stagnant labour market.
“Rising costs, economic and political uncertainty, in conjunction with leaps in technology, are causing employers to pull back on hiring. That said, there are still opportunities for talent to flourish in areas such as AI, tech, and data, where employers continue to invest in new technologies and tools for those all-important productivity gains.”
Nicholas Hyett, investment manager at Wealth Club, said that, while unemployment was broadly in line with inflation, there were “worrying signs” in the economy.
“Vacancies have fallen by 10,000 in the quarter to August, a 38th consecutive fall, and is less than half the number of people currently claiming unemployment benefits. With the estimated number of workforce jobs also falling, it looks like the UK economy is simply not creating enough jobs, and that problem is slowly worsening,” he said.
“With wages rising faster than inflation, and inflation itself still high, it seems unlikely the Bank of England will ride to the rescue with interest rate cuts in the near term. This is not the pro-growth economy the government was hoping for when it was elected, and there is a real danger that economic conditions continue to cool as we go through autumn,” Hyett added.
Sign up to our weekly round-up of HR news and guidance
Receive the Personnel Today Direct e-newsletter every Wednesday
Latest HR job opportunities on Personnel Today
Browse more human resources jobs
