UK Wages Surprise Higher as Payroll Employment Drops 13K — What Does It Mean for the Labour Market?

UK Wage Growth Above Estimates

regular pay, excluding bonuses, increased 3.5% year-on-year to GBP 703 per week in the three months to June 2026, following growth in the previous two periods of 3.4%, which was in line with market expectations. It was the fastest annual rise since the three months to February, as public sector pay accelerated to 6.1% from 5.5%, marking the strongest increase since the three months to December 2025. Meanwhile, private sector wage growth eased slightly to 2.8% from 2.9%, the slowest since the three months to October 2020. By industry, wages rose in wholesale, retail, hotels and restaurants (3.5%), manufacturing (2.8%), services (3.8%), and finance and business services (2.3%), but declined in construction (-0.1%). After adjusting for inflation, real regular pay increased 0.5%, up from 0.3% in the prior period and pointing to the strongest growth since the three months to December 2025.

UK Payroll Employment Falls 13K in July

The number of payrolled employees in the UK dropped by 13 thousand to 30.3 million in July 2026, following a revised decline of 13 thousand in June. Compared with a year earlier, employment fell by 0.3%, or 94 thousand. The wholesale and retail sector recorded the biggest annual decline in payroll employment, shedding 75,000 jobs, whereas the administrative and support services sector recorded the largest increase, adding 63,000 employees. Across NUTS3 regions, Camden and City of London experienced a decrease of 1.8% in payrolled employees, while Mid Ulster recorded a 1.5% increase. Meanwhile, median monthly pay rose by 4.2% year-on-year to £2,642, easing slightly from a 4.3% increase in May. Growth in median pay was highest in the health and social work sector (+5.3%) and lowest in the education sector (+3.3%).

UK Jobless Rate Steady at 4.9%

The UK unemployment rate was unchanged at 4.9% in the three months to June 2026, defying expectations for a decline to 4.8%. The number of unemployed people fell by 36 thousand to 1.772 million, driven by a decrease in those unemployed for up to six months. However, unemployment was up by 88 thousand from a year earlier, reflecting an increase in the number of people unemployed for between six and 12 months. Meanwhile, total employment rose by 84 thousand to 34.469 million, following a 147 thousand increase in the previous period. Employment was also up by 253 thousand from a year earlier. In the April–June period, full- and part-time employment rose year-on-year, driven by increases in full-time employees and part-time self-employed workers. The number of people holding second jobs increased over the latest quarter to 1.293 million, accounting for 3.8% of all employed individuals.

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