UK’s jobless rate falls but shrinking vacancies a ‘bitter blow’ to jobseekers

Britain’s jobless rate has fallen to the lowest level in more than a year as fewer people were unemployed last month, in a bout of welcome news for the Chancellor before his autumn Budget.

However, the number of vacancies available to workers has seen its biggest decline since the start of the year as job opportunities dry up.

The rate of UK unemployment fell to 4.7% in the three months to August, from 4.9% in the three months to July, the Office for National Statistics said.

This was the lowest level since the three months to July 2025 and marked a surprise drop in the proportion of people without a job.

There were 1.71 million people unemployed in the latest period, which was 47,000 fewer than the previous quarter, according to the latest figures.

More timely data suggests that the number of workers on payrolls increased by about 13,000 between August and September, up from a revised increase of 1,000 between July and August.

This marks a reversal after several months of declining employee numbers, but the ONS stressed that the data was provisional and likely to be revised.

It could come as welcome news to John Healey who is more than a week away from delivering his autumn Budget.

The Chancellor has said he wants to improve job prospects for younger people and recently unveiled new funding for local mayors to boost apprenticeships.

Economists said the latest jobs market data may come as welcome news to Chancellor John Healey ahead of his autumn Budget (Annabel Lee-Ellis/PA)

PA Wire

Many businesses say they have been shedding more jobs and recruiting less because of increased labour costs.

This has been showing up in the shrinking number of job vacancies in the economy.

Vacancies fell by 21,000 to 691,000 in the three months to September, according to the ONS’s estimates.

This marked the biggest decline since the start of the year and a new five-year low.

Outside of the Covid pandemic years, there have not been so few vacancies since 2014.

The ONS said its survey continues to suggest that smaller firms were particularly pulling back on hiring because of higher costs.

Maxine Bligh, interim chief executive of the Recruitment and Employment Confederation (REC), said: “Employment is up, unemployment is down and wage growth has picked up, all signs that the jobs market remains stable.

“But the biggest fall in vacancies since the start of the year is a bitter blow for jobseekers this morning and shows that employers remain cautious.

“Jobseekers and the Chancellor will hope the Budget comes at the right moment to boost business confidence, particularly among smaller firms facing higher employment costs.”

The ONS’s latest data also showed a boost for average wages across the UK workforce.

Average regular earnings growth rose to 3.7% in the three months to August, from 3.5% growth in the three months to July.

Pay continues to outstrip inflation, rising by 0.8% after taking Consumer Prices Index (CPI) inflation into account.

However, total earnings growth, which includes bonuses, fell to 3.7% in the three months to August, which was the lowest rate in nearly six years.

Other economists pointed to areas of improvement in the latest dataset, including an increase in people on private sector payrolls for the first time since January.

James Smith, developed markets economist for ING, said: “Hospitality – a key area of weakness – recorded a small increase for the first time in months, having been hammered by last year’s combination of a big minimum wage hike and tax increases.

“These figures are prone to a fair bit of revision, but it does tally with the signal coming from some of the hiring surveys that employment is starting to turn a corner.”

Danni Hewson, head of financial analysis at AJ Bell, said: “John Healey has come under increasing pressure from all sides to deliver measures that will help solve a youth unemployment crisis.

“The latest set of data showed the unemployment level amongst 16 to 24-year-olds edged up over the last quarter to the highest level since the three months to October 2025.

“Smaller firms say increased labour costs are preventing them from hiring and there have been renewed calls from businesses for the Chancellor to step in.

“Increasing the employer national insurance threshold even a little could make hiring part-time workers or young people looking for their first weekend job a more viable consideration.”