UK Labour Market Loses Further Momentum in Second Quarter

Britain's labour market showed further signs of slowing in the second quarter, with weaker private-sector wage growth and vacancies falling to their lowest level in more than five years, according to official data.

Private-sector regular earnings increased by 2.8% year-on-year in the three months to June. This was the weakest growth recorded since the three months to October 2020. The figure was in line with the Bank of England's forecast from last month.

The unemployment rate remained at 4.9%, rather than falling to the 4.8% expected by economists surveyed by Reuters.

Job vacancies also declined. The number of available positions fell to 707,000 in the three months to July from 711,000 in the previous three-month period. Excluding the pandemic period, this was the lowest vacancy level since late 2014.

Employment increased by 83,000 during the second quarter, below the 129,000 median forecast in the Reuters poll and representing the weakest increase in five months.

Separate tax-office figures showed that the number of employees on payrolls dropped by 12,850 in July. This marked the sixth consecutive monthly decline.

Overall earnings excluding bonuses grew by 3.5% in the second quarter, compared with 3.4% in the three months to June. The increase was influenced by the timing of National Health Service pay awards, which pushed public-sector pay growth to 6.1%.

After adjusting for inflation, earnings excluding bonuses increased by 0.7% year-on-year in the three months to June. This was the strongest reading of the year, alongside a decline in inflation that economists consider temporary.

The Bank of England is monitoring whether higher energy prices linked to the Iran war could create longer-term inflation pressures and influence future pay growth.