20 October 2026
If you are covering the latest UK labour market statistics, please see the following comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“With the Budget just over a week away, the labour market remains subdued. Payrolled employee numbers fell by 111,000 or 0.4% between August 2025 and August 2026, although they were broadly flat on the month, increasing by just 1,000. The early estimate for September shows employee numbers down 66,000 on the year but up 13,000 on the month, suggesting there are tentative signs that conditions may be stabilising.
“The unemployment rate fell to 4.7% in the three months to August, while vacancies fell by 21,000 to 691,000 in July to September. Taken together, these figures offer some encouragement that the jobs market may be finding a floor, but businesses remain cautious about adding to headcount. The continued fall in vacancies is particularly notable, with smaller businesses reporting that higher labour costs may be holding back recruitment. The government will be hoping the Budget can help restore some of the confidence needed to get companies hiring again.
“For the Bank of England, however, the wage numbers may be just as important as the employment figures. Regular pay growth stood at 3.7% in the three months to August. With inflation above target, the Bank needs to see convincing evidence that domestic wage pressures are easing. Pay growth has moderated substantially from the levels seen in recent years and today’s figures offer some reassurance on that front, even if it is very unlikely to clear the way for lower rates.
“That leaves policymakers with an uncomfortable balancing act. The labour market has clearly softened and pushing rates higher risks placing further pressure on households and businesses. But with inflation risks still elevated, the Bank cannot react to weaker employment in isolation. The combination of wage and employment figures will therefore be important ahead of November’s interest rate decision.
“Attention now turns to the Budget. Signs that the labour market may be stabilising are welcome, but the recovery remains fragile and the government will not want to do anything that further discourages businesses from hiring. Ultimately, a sustained recovery will require businesses to feel sufficiently confident about both the economic outlook and their costs to start adding meaningfully to headcount again.”
