UK Labour Market Shows Tentative Signs of Stabilisation Amid Stagnation

Despite exceeding expectations, the UK economy is facing stagnation in its labour market. According to Deutsche Bank's Chief UK Economist Sanjay Raja, while the jobless rate remains stuck at 4.9%, there are tentative signs of stabilisation brewing.

The jobless rate has been flat since July, and payrolled employees have fallen by 13k monthly. Wage growth in the private sector continues to slow, with Average Weekly Earnings decreasing to 2.8% (3m/YoY).

However, Raja notes that there are stabilisation signals emerging in vacancies, redundancies, claimant count, and labour market flows. Job vacancies have slowed, but only to 707k from 711k, while the vacancy to unemployment ratio has been stable for a few months.

The number of redundancies has also slowed to its lowest level since July 2025, at 106k. The claimant count dropped from 4.4% to 4.3%, and labour market flows point to some momentum in activity.