UK unemployment falls to lowest in a year but vacancies slide further

The UK’s unemployment rate has fallen to the lowest level in more than a year despite the number of vacancies sliding for another month, new figures show.

The rate of UK unemployment fell to 4.7% in the three months to August, from 4.9% in the three months to July, the Office for National Statistics said.

This was the lowest level since the three months to July 2025 and marked an unexpected decline for the month.

More timely data suggests that workers on payrolls increased by about 13,000 between August and September, up from a revised increase of 1,000 between July and August.

This marks a reversal after several months of declining employee numbers, but the ONS stressed that the data was provisional and likely to be revised.

The ONS’s data also showed a boost for average wage growth across the UK workforce.

Average regular earnings growth rose to 3.7% in the three months to August, from 3.5% growth in the three months to July.

Pay continues to outstrip inflation, rising by 0.8% after taking Consumer Prices Index (CPI) inflation into account.

However, total earnings growth, which includes bonuses, fell to 3.7% in the three months to August, which was the lowest rate in nearly six years.

Furthermore, the latest dataset shows that the number of job vacancies advertised by employers continued to shrink, with smaller firms particularly pulling back on hiring,

Vacancies fell by 21,000 to a fresh five-year low of 691,000 in the three months to September, according to the ONS’s estimates.

This marked the biggest decline since the start of the year.

ONS deputy director of labour market statistics, David Freeman, said: “While the labour market remains broadly flat in 2026, data from the latest quarter shows the employment rate edging up and a small drop in unemployment.

“The number of workers on payroll remains slightly down over the same period, though data for the most recent month suggests that might be starting to level off.

“The number of vacancies has seen its largest fall since the start of the year, concentrated mainly within smaller businesses, which cite increased labour costs as a key factor.

“Regular wage growth remained relatively stable, though total pay – including bonuses – has eased to its lowest rate in nearly six years.”

Sanjay Raja, chief UK economist for Deutsche Bank, said signs that the UK jobs market is stabilising is “good news” for Chancellor John Healey.

“Firms are slowing coming out of the woods as pertains to hiring, and more workers will mean more tax receipts,” he said.

James Smith, developed markets economist for ING, said: “After a long period of attrition, there are tentative signs that employment is stabilising.

“Hospitality – a key area of weakness – recorded a small increase for the first time in months, having been hammered by last year’s combination of a big minimum wage hike and tax increases.

“These figures are prone to a fair bit of revision, but it does tally with the signal coming from some of the hiring surveys that employment is starting to turn a corner.”

However, experts said the latest data reinforces expectations that the Bank of England could hike interest rates in November.

Thomas Pugh, chief economist at RSM UK, said: “For the Bank of England, the stronger economy and stabilising labour market means there is no longer a trade-off between low growth and high inflation.

“This morning’s data means an interest rate hike in November now looks exceedingly likely and will probably be followed by at least one more next year.”