Britain's labour market displayed signs of cooling in the second quarter, with official statistics pointing to weaker private-sector pay growth and a fall in advertised jobs to levels not seen in over five years.
Private sector regular earnings - a series closely tracked by the Bank of England as an indicator of domestic inflationary pressure - rose 2.8% on a year earlier in the three months to June. That rate represents the slowest annual increase since the three months to October 2020 and matched the central bank's own projection published last month.
Overall annual earnings growth, excluding bonuses, was reported at 3.5% in the second quarter, according to the Office for National Statistics. Economists surveyed by Reuters had largely anticipated regular wage growth of 3.4%.
The ONS said the job vacancy count fell to 707,000 in the three months to July, down from 711,000 in the three months to July. The figure is the smallest total since the three months to April 2021, and, excluding the pandemic period, represents the lowest number of vacancies since late 2014.
The unemployment rate held at 4.9%, unchanged from the prior reading and slightly above the 4.8% level forecast in a Reuters poll of economists. Sterling ticked down modestly on the release of the data.
"The labour market picture is little changed overall, with some softening still evident," said ONS Director of Economic Statistics Liz McKeown.
Financial markets have reflected the softer labour signals while also taking account of broader inflation risks. Market pricing on Monday indicated one 0.25 percentage-point interest rate hike was expected by the end of 2026.
The Bank of England is paying close attention to whether the recent jump in energy prices linked to the Iran war is translating into longer-term inflationary pressures across the economy. Private sector pay, unemployment and the vacancies count are among the indicators the central bank monitors when assessing domestic inflation dynamics.
The data collectively point to moderated wage growth alongside easing demand for labour, while headline pay measures - excluding bonuses - remain in positive territory. The ONS results and the BoE's focus on energy-driven inflation risks will be watched by policymakers and market participants alike.
Data snapshot
- Private sector regular earnings (year-on-year, three months to June): 2.8%
- Overall annual earnings growth excluding bonuses (Q2): 3.5%
- Job vacancies (three months to July): 707,000
- Unemployment rate: 4.9%