The latest labour market data from the ONS shows the UK economy continuing to lose momentum.
In March to May 2025, average weekly earnings were up 5.0% on the year, both excluding and including bonuses. At 5.5%, public sector pay growth continues to outstrip the private sector, at 4.9%.
There were 727,000 job vacancies in April to June 2025, down 56,000 on the quarter. There have now been quarterly declines every month for the last three years.
“The figures reinforce recent signals from business surveys that hiring conditions are softening in the wake of the employer National Insurance changes,” says Lindsay James, Investment Strategist at Quilter.
She notes that recruiters have reported falling vacancy levels, rising candidate availability, and weaker wage pressures, all of which point to a job market that is gradually rebalancing after a period of acute tightness.
“The Bank of England will be watching these numbers closely, especially in light of yesterday’s inflation print, which showed a slight uptick in headline CPI to 3.6%.
“While the rise was modest, it muddles the waters for the Monetary Policy Committee, which has been looking for clear signs that inflationary pressures are easing before cutting rates,” she said.
Governor Andrew Bailey recently flagged emerging slack in the labour market, and today’s employment data may add weight to that view.
However, the inflation figures suggest that price pressures, particularly from transport and housing, remain uneven, complicating the timing of any policy move, said James.
“With inflation still above target but labour market conditions loosening, the Bank faces a delicate balancing act. Markets had been increasingly pricing in a rate cut as soon as August, but yesterday’s inflation surprise may temper those expectations.”
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