Britain’s labour market showed further signs of strain in August, with payroll employment declining again and wage growth easing, according to new figures from the Office for National Statistics (ONS).
The number of people on company payrolls fell by 8,000 last month to 30.3 million, following a revised drop of 6,000 in July. Over the past year, payroll employment has shrunk by 127,000, reflecting a steady decline in hiring across multiple sectors.
The unemployment rate held steady at 4.7% in the three months to July, broadly in line with forecasts. However, the ONS highlighted that demand for workers continues to weaken. Job vacancies dropped by 10,000 to 728,000 in August, marking the 38th consecutive month of falling openings.
Wage growth also showed signs of moderation. Average weekly earnings excluding bonuses rose 4.8% compared with a year earlier, down from 5% in the previous month. When bonuses are included, pay grew 4.7%. Economists view pay trends as a key indicator for inflationary pressures, and the Bank of England has consistently flagged wage data as a critical factor in shaping monetary policy.
The latest figures arrive just ahead of the Bank’s policy meeting this week. After cutting rates in August for the fifth time this year, policymakers are widely expected to leave the benchmark interest rate unchanged at 4%. Market analysts anticipate rates will remain on hold for the rest of 2025 as the Bank attempts to strike a balance between easing inflation and avoiding further strain on the jobs market.
Inflation figures due on Wednesday are forecast to show annual consumer price growth of between 3.8% and 3.9% in August—still nearly double the central bank’s 2% target.
Liz McKeown, ONS director of economic statistics, said: “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.”
The data adds to mounting evidence that Britain’s post-pandemic employment boom has come to an end. A combination of weaker hiring, slowing pay growth and persistent declines in vacancies has hit industries ranging from retail to construction, which have reported sharp drops in demand for new workers.
Economists warn that while slowing pay growth could help ease inflationary pressures, it also risks weighing on consumer spending at a time when households continue to struggle with elevated living costs. With inflation still running well above target and the jobs market losing momentum, the Bank of England faces an increasingly delicate policy challenge in the months ahead.
