DWF comments on latest UK labour market statistics
18th September 2026, 12:44 pm
Joanne Frew says: “The latest figures suggest a labour market that is proving relatively resilient despite ongoing economic uncertainty. The UK employment rate decreased by 0.1% on the year, but remained largely unchanged at 75.1% in the quarter May to July 2026, compared with the previous quarter. The UK unemployment rate was estimated at 4.9% for the same quarter. This is an increase of 0.2% on the year but largely unchanged on the latest quarter. The data presents a picture of gradual cooling rather than significant change. Employment levels have eased, while unemployment has ticked up compared with a year ago, highlighting the pressures facing both employers and jobseekers. That said, the shifts remain relatively modest, suggesting that the labour market continues to be characterised by stability rather than volatility.
Vacancy estimates in the UK decreased in the latest quarter. Early estimates for June to August 2026 suggest a decrease of 8,000 to 702,000 compared to March to May 2026. Survey feedback suggests that rising labour costs may be prompting some smaller employers to scale back recruitment activity. The latest data indicates that hiring intentions remain subdued amid ongoing economic uncertainty and significant workplace reform, with vacancy levels continuing to provide an important insight into wider business confidence.
Annual growth in employees’ average earnings was 3.5% in May to July 2026 and has been relatively stable over the past five consecutive three-month periods, following a year of slowing growth. The continued moderation in earnings growth suggests that, while competition for talent remains a feature of the labour market, many employers have limited scope to meet expectations for higher pay as they contend with ongoing cost pressures.
Looking ahead, employers continue to navigate a challenging operating environment. Inflation increased to 2.9% in the year to July 2026, driven largely by higher energy costs, highlighting that cost pressures remain a significant consideration despite signs of resilience elsewhere in the economy. At the same time, organisations are preparing for the next phase of implementation of the Employment Rights Act 2025, with a number of employment law reforms due to take effect at the end of October 2026. Many employers are also beginning to plan for the significant changes to unfair dismissal rights expected in January 2027, including the reduction of the qualifying period for ordinary unfair dismissal claims to six months and the removal of the cap on compensation.
Against this backdrop of ongoing economic and regulatory change, many employers are likely to maintain a cautious and carefully targeted approach to recruitment, workforce planning and reward decisions in the months ahead.”
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