The UK’s labour market showed further signs of gradual cooling in June, with payroll employment continuing to edge lower while wage growth remained broadly stable. Early estimates showed the number of payrolled employees fell by -4,000 from May and was down -71,000, or 0.2%, from a year earlier. Median monthly pay growth eased to 4.3% year-on-year from 4.6% in May, suggesting wage pressures are continuing to moderate alongside softer hiring conditions.
The broader labour market data for the three months to May painted a similar picture. Average regular earnings excluding bonuses held at 3.4% year-on-year for a third consecutive period, extending the marked slowdown from the 5.9% pace recorded in early 2025 and reaching the weakest growth since late 2020. Total earnings, including bonuses, rose 4.3%.
Meanwhile, the employment rate edged up to 75.1% over the quarter, while the unemployment rate slipped to 4.9% from the previous three-month period, indicating that labour market conditions remain relatively resilient despite slower wage growth.
Overall, continued moderation in pay growth should provide reassurance to the Bank of England that domestically generated inflation pressures are easing, although wage growth remains above levels fully consistent with the 2% inflation target.
Labour Market Data
| Indicator | Actual | Expected | Previous |
|---|---|---|---|
| Claimant Count Change (Jun) | 6.7K | 29.4K | 31.2K |
| ILO Unemployment Rate (3M/May) | 4.9% | 4.9% | 4.9% |
| Average Earnings ex Bonus (3M/Y May) | 3.4% | 3.4% | 3.4% |
| Average Earnings incl Bonus (3M/Y May) | 4.3% | 4.5% | 4.4% |
Market Takeaways
- The labour market continued to cool, but there were no signs of a sharp deterioration.
- Payroll employment declined by 71,000 year-on-year, while June payrolls were broadly unchanged from May (-4,000).
- Median monthly pay growth eased to 4.3% y/y in June from 4.6%, reinforcing the trend of moderating wage inflation.
- Regular wage growth held at 3.4% for a third consecutive period, the slowest pace since late 2020.
- Claimant count rose by 6.7K, well below expectations of 29.4K, suggesting layoffs remain relatively contained.
