Financial News: UK Labor Market Cools In Q2

UK Labor Market Cools In Q2

08/12/2025 - 09:34:00 (RTTNews)

(RTTNews) - The U.K. labor market softened in the second quarter as wage growth eased, the unemployment rate held steady at a four-year high and job vacancies continued to decline sharply, official data revealed on Tuesday.

The ILO jobless rate held steady at 4.7 percent in the second quarter, figures from the Office for National Statistics revealed and was in line with expectations.

Annual growth in employees' average earnings excluding bonuses remained steady at 5.0 percent in the three months to June period, which was faster than the expected increase of 4.7 percent.

However, total earnings including bonuses climbed 4.6 percent, which was slower than the 5.0 percent increase in the preceding period.

Payroll employees decreased 164,000 year-on-year in July, and by 8,000 from June, to 30.3 million.

In the three months to July, the estimated number of vacancies fell by 44,000 from the previous quarter, to 718,000. This was the 37th consecutive period where vacancy numbers have dropped compared with the previous three months, the ONS said.

In June, about 38,000 working days were lost because of labor disputes across the UK.

British Chambers of Commerce Deputy Director of Public Policy Jane Gratton said continued wage growth is creating real challenges for business and the wider economy. Labor costs remain the biggest burden for firms.

"With businesses feeling the heat from a raft of cost-pressures, a larger easing of average earnings, including bonuses, to 4.6 percent in June will be welcomed," said Gratton.

ING economist James Smith said a more moderate fall in payroll employment indicates that the worst may be behind us, following big tax and living wage hikes.

Better news on wage growth suggests that the Bank of England can still afford to cut rates in November, but this call has become less clear-cut after last week's hawkish meeting, Smith noted.

Last week, the BoE reduced its interest rate by a quarter-point, which was the fifth cut since last August. At 4.00 percent, the bank rate hit the lowest since early 2023.

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