UK labour market softens further with continued job losses and slowing wage growth

Today’s numbers show a continued weakening in the labour market.

The number of payrolled employees in July declined by 164,000 compared with a year earlier, while vacancies extended their fall.

Meanwhile, average total earnings growth slowed to 4.6% in Q2.

The continued slackening in the labour market was one of the main factors behind the Bank of England’s decision to cut rates last week, despite near-term increases in the rate of inflation.

As temporary factors dissipate, we anticipate the poorer economic conditions typified by labour market weakness to bring inflation closer to the Bank’s 2% inflation target over the course of 2026.