UK Jobs Market Cools as Payrolls Drop and Vacancies Decline
The UK jobs market is showing signs of a slowdown as payroll numbers fall and vacancies continue to drop, according to the latest data from the Office for National Statistics (ONS). Official figures reveal that the number of payrolled employees declined by 8,000 in July 2025, bringing the total to 30.3 million. This represents the latest in a series of small monthly declines, reflecting a gradually cooling labour market.
Vacancies also dropped by 10,000 over the quarter to August, falling to 728,000. Businesses across multiple sectors have been cautious about hiring as they deal with higher costs from national insurance and minimum wage increases. While unemployment remained flat at 4.7 percent in the three months to July, experts warn that the jobs market is likely to remain subdued heading into the end of 2025.
Payroll Employment and Vacancies
ONS figures confirm that payrolled employment stood at 30.3 million in July 2025, down from the previous month. This continues a slow downward trend seen through the year as firms limit hiring.
Vacancies dropped by 10,000 in the three months to August, leaving total openings at 728,000. Although this represents a slower rate of decline compared to earlier in the year, vacancies remain below pre-pandemic levels. Some economists note that this cooling is coming from lower hiring intentions rather than mass layoffs.
Public Sector Hiring
While private sector employment is softening, the public sector continues to expand its workforce. Available ONS data confirms that public sector employment has grown steadily over the last year, though some of the specific figures cited elsewhere such as the exact number of central government employees or NHS staff could not be fully verified.
What is clear is that NHS hiring remains a significant driver of public sector growth, reflecting ongoing efforts to address backlogs and improve patient care.
Wage Growth and Inflation
Wage growth data from the ONS shows regular pay (excluding bonuses) rising by around 4.8 percent in the three months to July 2025. This figure is down from the previous quarter and represents the slowest wage growth since mid-2022.
While wages are still outpacing consumer price index (CPI) inflation by around 1.2 percent, the gap is narrowing suggesting that real income growth is slowing for workers.
Expert Commentary
Economists view the gradual cooling of the labour market as a sign that businesses are adjusting hiring plans rather than implementing mass redundancies.
Matt Swannell, chief economic adviser at EY Item Club, said: “The jobs market continues to loosen very slowly. The gradual adjustment is coming through a slow change in companies' hiring intentions, rather than large-scale lay-offs.”
Helen Dickinson, chief executive of the British Retail Consortium, issued a warning that the retail sector is under significant pressure, citing job losses in the sector and rising costs due to National Insurance Contributions (NICs) and the National Living Wage (NLW).
Monetary Policy Outlook
The Bank of England is expected to keep interest rates on hold at 4 percent when it announces its latest decision later this week. Economists suggest that the Monetary Policy Committee (MPC) will focus on bringing inflation under control, with rate cuts now widely seen as unlikely before 2026.
Final Summary
The UK labour market is continuing to cool in the second half of 2025, with payroll numbers and vacancies both trending down. Regional and sectoral differences are becoming more pronounced, with retail and manufacturing regions facing the sharpest declines.
While public sector hiring is helping offset some of the private sector slowdown, wage growth is losing momentum, narrowing the gap with inflation and reducing the boost to household incomes. With the Bank of England expected to hold rates steady, the focus for policymakers will be balancing inflation control with maintaining employment stability as the economy heads into 2026.
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