UK unemployment falls as vacancies decline

The UK unemployment rate fell to 4.7% in the three months to August 2026, down from 4.9%. This unexpected decline indicates that more people were in work or moving into employment over the period. The figures arrive shortly before the government’s Budget and form an important part of the economic backdrop for fiscal decisions.

The fall in unemployment comes alongside broader labour market adjustments. While the rate is lower, it coexists with signs that hiring demand is cooling, creating a mixed picture for policymakers assessing overall labour market strength.

Job vacancies decreased by 21,000 in the three months to September 2026 to around 691,000. This is the first time the total has been below 700,000 since early 2021 and represents the lowest vacancy level in more than five years. The data indicate that employers have been reducing the number of advertised roles as labour demand softens.

The decline in vacancies has been linked in particular to smaller firms cutting back on recruitment, with construction among the sectors seeing the largest decreases. The combination of a lower unemployment rate and a reduced pool of vacancies suggests that, while more people are in work, opportunities for job switches or new hiring may be narrowing.

Average earnings excluding bonuses, or regular pay, increased by 3.7% year on year in the three months to August 2026. When adjusted for consumer price inflation, regular pay rose by about 0.8% in real terms over the same period. This indicates that workers, on average, experienced modest increases in their purchasing power.

The figures show that nominal wage growth remains positive while not accelerating sharply. The real-terms improvement reflects inflation running below the pace of pay increases, providing some support to household incomes in the context of a cooling vacancy market.

Taken together, the fall in unemployment, the drop in vacancies and the modest rise in real wages present a complex picture. The data point to a labour market that retains elements of resilience but is also experiencing a clear easing in hiring demand. These trends will be central to forthcoming discussions on fiscal and economic policy.

Officials have highlighted the resilience implied by lower unemployment and positive real pay growth, while also noting ongoing concerns, including continued difficulties for younger people in finding work. The latest figures are likely to shape debate about how to balance support for employment with measures aimed at boosting productivity and job creation.