UK unemployment rate unexpectedly dips - ONS

20th Oct 2026 07:25

(Sharecast News) - The UK unemployment rate unexpectedly dipped in August, official data showed on Tuesday, although the number of vacancies also continued to fall.

According to the Office for National Statistics, the unemployment rate in June to August was 4.7%, better than the 4.9% markets were expecting and down 0.1 percentage points on both the year and quarter.

However, vacancies also fell, by an estimated 2.9% quarter-on-quarter in the three months to September, as small firms opted to hold back on hiring amid higher costs. It was the largest fall since the start of the year.

David Freeman, deputy director of labour market statistics at the ONS, said: "The number of vacancies has seen its largest fall since the start of the year, concentrated mainly within smaller businesses, which cite increased labour costs as a key factor."

Wage growth, meanwhile, remained relatively stable. Annual growth in employees' average regular earnings excluding bonuses was 3.7%, up from 3.6% and marginally ahead of consensus for no change. Including bonuses, and growth slowed to 3.7% from 3.9%, the lowest rate in nearly six years.

Driving the growth was the public sector, where annual average regular earnings growth was 6.3% compared to 3% in the private sector.

The data will provide the Treasury with a final snapshot of the job market ahead of John Healey's Budget next week. The chancellor needs to balance mounting inflation, in the wake of war in the Middle East, and cost of living pressures with soaring government spending and debt and sluggish economic growth.

Consumer sentiment also remains depressed, as households brace for interest rate hikes.

Danni Hewson, head of financial analysis at AJ Bell, said: "The chancellor may well see the jobs figures as more relatively positive news ahead of the Budget. It's another sign of the resilience of the UK economy despite dwindling consumer confidence and nerves about rising prices."

James Smith, developed markets economist, UK, at ING, said: "After a torrid couple of years for UK employment, there are growing signs that the worst is behind us and that hiring is starting to stabilise. But that's not the same thing as a jobs market that is heating up. Wage growth is cool and there's scant evidence of second-round effects from the energy shock so far.

"So when the BoE hikes rates in November - as looks increasingly likely - it won't be because of anything in the economic data. Instead, together with the follow-up move we tentatively expect in February, [it] will be entirely an insurance move. That means that, assuming we don't get big second-round effects emerging over the winter, the BoE should be in a position to start cutting rates again from late 2027."