The UK’s unemployment rate saw a slight decrease, with the latest figures from the Office for National Statistics (ONS) showing unemployment at 4.2% in the three months leading up to the end of June, down from 4.4% in the previous quarter. However, the ONS also reported a continued slowdown in wage growth, which rose at an annual rate of 5.4%, marking the weakest increase in nearly two years.
Liz McKeown, the ONS’s director of economic statistics, noted that despite the positive decline in unemployment, there are signs that the job market is cooling. Factors such as high numbers of vacancies, redundancies, and individuals not actively seeking work suggest a potential slowdown in the labor market.
The ONS urged caution in interpreting these figures, highlighting that the Labor Force Survey, which produces this data, has experienced a reduced number of respondents over the past year, potentially affecting the accuracy of the results.
Chancellor Rachel Reeves acknowledged the need for further efforts to support employment. She emphasized that the upcoming Budget would involve difficult decisions on spending, welfare, and taxation to strengthen the economy and improve living standards across the UK.
The figures could influence the Bank of England’s monetary policy, possibly leading to additional interest rate cuts. Earlier this month, the Bank reduced the rate to 5% from 5.25%, the first cut in over four years. While high rates have been instrumental in controlling inflation, they have also increased borrowing costs for consumers and contributed to wage growth, which, although beneficial for workers, has led some businesses to reduce hiring.
The ONS also reported a decline in estimated job vacancies, which fell by 26,000 to 884,000 in the three months leading up to July. KPMG UK’s chief economist, Yael Selfin, suggested that the deceleration in pay growth might reassure the Bank’s Monetary Policy Committee that domestic inflationary pressures are easing.
However, concerns persist about the rising number of people not working or seeking employment, particularly among young people with long-term health conditions, such as mental health issues. Hannah Slaughter, a senior economist at the Resolution Foundation, stressed the importance of improving healthcare, especially mental health services, to address this troubling trend.
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