UK Labour Market Cools as Vacancies Fall to Lowest Non-Pandemic Level Since 2014

The UK labour market showed further signs of cooling in the latest official data, with job vacancies falling to 707,000 in the three months to July and payroll employment remaining below year-earlier levels. The vacancy total was the lowest outside the coronavirus pandemic period since late 2014, according to the Office for National Statistics.

The figures point to softer labour demand rather than a sudden collapse in employment. The estimated number of vacancies fell by only 6,000 from the previous three-month period, and the ONS said that change was within the survey’s confidence interval. At the same time, payroll data have been trending lower, private-sector pay growth has eased and unemployment remains higher than a year ago even though it edged down in the latest quarter.

Vacancies fall back to levels last seen in 2014

The ONS labour market release for August estimated 707,000 vacancies in May to July 2026, down 6,000, or 0.8%, from February to April. Vacancies were also down 19,000, or 2.7%, from a year earlier and stood 81,000 below their January to March 2020 level. Outside the pandemic, the last time the total was 707,000 or lower was September to November 2014, when the ONS recorded 703,000 vacancies.

The historical comparison is striking, but the latest quarter-to-quarter move needs to be read cautiously. The ONS said the confidence interval around the vacancy estimate is approximately plus or minus 32,000, much larger than the reported 6,000 quarterly decline. The agency also noted that vacancies have been broadly flat since the start of 2026, falling by only 11,000 since January to March. The longer-term picture is clearer: demand for new workers is substantially lower than it was at the post-pandemic peak and is now below the level recorded just before COVID-19 disrupted the economy.

Weakness was spread across several industries. Vacancy estimates declined in nine of the 18 sectors measured on the quarter. Human health and social work activities recorded the largest fall by number, down 5,000 vacancies, or 4.1%, while education posted the largest percentage decline, down 7.3%, or 4,000 vacancies. On a year-over-year basis, vacancies fell in 11 of the 18 sectors. Human health and social work had the largest annual decline by volume, down 11,000, while wholesale and retail trade and the repair of motor vehicles and motorcycles fell by 7,000.

Smaller employers were a particularly weak part of the survey. Businesses with one to nine employees had an estimated 95,000 vacancies, down 8,000, or 7.8%, from the previous quarter. Outside the pandemic, that was the lowest level for the group since January to March 2014, when the estimate was 94,000. Compared with a year earlier, vacancies at the smallest firms were down 18,000, or 16.1%. The ONS said feedback from its Vacancy Survey suggested that some firms may not be recruiting because of higher labour costs and other operating expenses.

The number of unemployed people available for each vacancy also shows that the market is less tight than it was a year ago. There were an estimated 2.5 unemployed people per vacancy in April to June 2026, unchanged since July to September 2025 but up from 2.3 in the same period a year earlier. A higher ratio generally means employers have a larger pool of available workers relative to open positions.

Payroll figures point to weaker employee demand

Administrative payroll data add to the evidence of softer hiring. The number of payrolled employees fell by 78,000, or 0.3%, between June 2025 and June 2026. On a monthly basis, the June total was largely unchanged, falling by 13,000. Looking at April to June, the period that is most comparable with the Labour Force Survey, payrolled employment was down 86,000 from a year earlier and 37,000 from the previous quarter.

The early estimate for July showed a further year-over-year decline of 94,000 payrolled employees, with the total at about 30.3 million. The provisional July estimate was also down 13,000 from June. The ONS cautioned that the latest month is subject to revision as more tax records are received, but it also said payrolled employee numbers have generally been falling over the past two years. The agency currently regards Pay As You Earn Real Time Information as its most reliable measure of employees.

The household-based Labour Force Survey presents a somewhat less negative picture. The UK employment rate for people aged 16 to 64 was estimated at 75.1% in April to June, up 0.1 percentage points from the previous quarter but down 0.2 points from a year earlier. The unemployment rate for people aged 16 and over was 4.9%, down 0.1 percentage points on the quarter but up 0.2 points over the year. The economic inactivity rate was 20.9%, broadly unchanged on both comparisons.

Those differences are one reason the ONS advises against relying on a single labour-market measure. Payroll data come from tax records, while employment and unemployment estimates come from a household survey, and the two systems measure different concepts over different reference periods. The ONS has also been working through survey-quality and sampling changes in the Labour Force Survey. Its guidance is to use the indicators together and focus on longer-term movements rather than small shifts from one month or quarter to the next.

Private-sector pay growth eases as the Bank weighs inflation risks

Pay data also suggest less pressure from the private labour market. Regular earnings excluding bonuses rose 3.5% from a year earlier in April to June, while total earnings including bonuses increased 4.1%. The split between sectors was much wider: regular public-sector earnings rose 6.1%, while private-sector regular earnings increased 2.8%. The ONS said public-sector growth continued to be affected by differences in the timing of pay awards this year.

After adjusting for inflation using the Consumer Prices Index including owner occupiers’ housing costs, regular pay increased 0.5% in real terms and total pay rose 1.1%. Average weekly earnings in June were estimated at £755 for total pay and £703 for regular pay. Those figures indicate that wage gains are still positive in real terms, but the private-sector pace is much slower than the rates seen during the earlier period of acute labour shortages.

The labour data arrive less than three weeks after the Bank of England kept Bank Rate at 3.75% by a 6 to 3 vote. Three Monetary Policy Committee members preferred a quarter-point increase to 4%. The majority said loose labour-market conditions and slowing wage growth were helping to contain domestic inflation pressure, even as the Bank remained concerned about the inflationary effects of higher and volatile energy prices. The latest ONS figures are consistent with that earlier description of a loosening labour market, but they do not remove the inflation risks that led several policymakers to favour tighter policy.

The next UK labour-market release is scheduled for September 15, when the ONS is due to update vacancies, payroll employment, unemployment and earnings. The Bank of England’s next interest-rate decision follows on September 17. Those releases will provide a clearer test of whether the fall in vacancies is developing into a broader weakening in employment or remains concentrated in hiring intentions and payrolls.