UK jobs market finally shows signs of life
Key Points
- Payrolled employees rose by 13,000 to 30.3 million in September
- Unemployment fell to 4.7% in the three months to August
- Real wages grew by £1.98 over the past year but peaked two months ago
- Vacancies fell to 691,000, the lowest outside the pandemic since 2014
- Inflation forecast to hit 4% in the new year will squeeze real pay
The UK jobs market may finally be turning a corner, the Resolution Foundation said on Tuesday (20 October). The thinktank said the UK’s relatively strong economic performance this year has started to feed through into employment and private sector pay over the summer.
Payrolled employment fell by 194,000 between October 2024 and July 2026, and private sector pay packets shrank in real terms between October 2025 and June 2026, the Foundation said.
Early estimates from the Office for National Statistics (ONS) show payrolled employees rose by 13,000 between August and September 2026 to 30.3 million.
The unemployment rate also fell by 0.1 percentage points to 4.7% in the three months to August, according to the ONS.
“The labour market has performed poorly in recent years as the number of jobs has fallen and pay growth weakened,” said Louise Murphy, senior economist at the Resolution Foundation.
“But the UK’s recent bout of economic resilience may finally be creating some green shoots, with employment levels finally rising and private sector wage growth stabilising,” she added.
Short-term private sector pay growth, based on the annualised change between March to May and June to August, rose to 4.3% in cash terms, the Foundation said.
Real wages have grown by £1.98 over the past year, although the Foundation said the level of real wages peaked two months ago.
“Overall though, real wages have grown by a princely £1.98 over the past year – enough to fund around two minutes’ worth of sweets for trick or treaters next week,” said Murphy.
Annual growth in total pay, including bonuses, slowed to 3.7% in June to August, its lowest rate since August to October 2020, the ONS said.
Private sector regular pay grew by 3.0% on the year, while public sector regular pay grew by 6.3%.
Inflation is rising and forecast to hit 4% in the new year, which the Foundation said will likely drive further falls in real wages.
Vacancies at lowest level since 2014
UK vacancies fell by 21,000 to 691,000 between April to June and July to September 2026, according to the ONS.
Outside of the pandemic, vacancies last sat this low in July to September 2014, when employers advertised 686,000 roles.
The ONS said feedback from its Vacancy Survey suggests smaller firms may have stopped recruiting because of higher labour costs.
The Resolution Foundation said falling vacancies show any recovery remains tentative, and that it needs to see further positive signs in the coming months.
“These tentative signs of recovery will be sorely tested in the coming months however as inflation approaches four per cent, putting pressure on real wages,” said Murphy. “The Chancellor will also hope too that his Budget helps rather than hinders this mini jobs recovery.”
