UK Private-Sector Pay Growth Hits Five-Year Low as Vacancies Plummet

The UK's labor market has shown signs of cooling down in the second quarter. Private-sector pay growth slowed to its weakest pace in over five years, reaching only 2.8% year-over-year, according to the Office for National Statistics (ONS). This is the smallest increase since October 2020 and matches the Bank of England's forecast from last month.

The unemployment rate remained steady at 4.9%, contrary to economists' expectations of a decline to 4.8%. The overall regular wage growth across the economy was 3.5% for the second quarter, marginally above the consensus forecast of 3.4%. However, public-sector regular pay accelerated from 5.5% to 6.1%, while private-sector pay continued to decelerate.

Vacancies fell to 707,000 in the three months to July, down from 711,000 in the previous period, marking the lowest total since April 2021. This decline in vacancies is attributed to smaller businesses citing labor and operating costs as reasons for scaling back hiring. The Bank of England is monitoring whether the energy price jump triggered by the Iran conflict is translating into longer-term inflation pressures.