Wage growth slows slightly over summer
Wage growth in the UK eased slightly over the summer as unemployment rose marginally.
According to new data from the Office for National Statistics (ONS), the average wage increase was 4.7 per cent in the three months to August, up from 4.8 per cent in July.
The national unemployment rate increased slightly from 4.7% to 4.8%.
Analysts said the data showed the UK job market had stabilized after a year of volatility.
Job vacancies fell by 9,000, or 1.3%, in the three months to September and the ONS said this was the 39th consecutive period in which job postings had fallen compared to the previous three months.
Liz McKeown, the ONS’s director of economic statistics, said: “After a long period of weak hiring activity, there are signs that the declines we have seen in both payroll numbers and vacancies are now stabilising.”
Ms McKeown said the ONS was seeing different patterns across age groups, adding that “the rise in unemployment is mostly driven by young people”.
There was a quarterly decline in the number of people who were economically inactive because they were students or retirees, but this was largely offset by an increase in the number of people who were economically inactive for other reasons, including long-term illnesses and other causes.
The ONS said the unemployment rate needed to be treated with caution and was taking further steps to address concerns about the quality of the data.
Private sector earnings growth was the lowest in four years but still above inflation.
The annual increase in workers’ average earnings was 6% in the public sector and 4.4% in the private sector.
Chris Hare, HSBC’s senior UK economist, said the data pointed to a “fairly stable labor market”.
“I think we’re probably seeing fairly soft demand for labor in the economy,” he said, adding that it should lead to “a gradual easing in broader cost pressures in the labor market and an easing in wage growth”.
The ONS said the annual growth rate of the public sector was affected by some public sector pay rises being paid earlier in 2025 than in 2024.
After the public sector, the wholesale, retail, hotel and restaurant sector showed the strongest annual regular growth rate.
The number of layoffs between June and August increased compared to the same period last year, reaching 3.8 per 1,000 employees in the June-August 2025 period.
The ONS also revised the previous figure for pay growth to 4.8% from 4.7%.
This figure will likely be used to calculate the amount of the increase. state pension for next year.
Under the triple lock policy, the state pension is increased by the highest of wage growth, inflation or 2.5%.
Inflation currently stands at 4.1 percent.
Stubbornly high wage growth could prevent the Bank of England from cutting interest rates before the end of the year, said Ashley Webb, an economist at Capital Economics.
“But we think it is only a matter of time before the loosening in the labor market will lead to a more significant slackening in wage increases and allow the Bank to cut interest rates,” he said.
