LONDON, Signalberita.com — The UK economy is currently performing better than expected, but conditions in the labor market remain largely stagnant.
Deutsche Bank’s Chief UK Economist, Sanjay Raja, said the UK unemployment rate remains at 4.9 percent, while the number of employees recorded on payrolls has declined.
Wage growth has also continued to slow. However, the labor market is not showing signs of weakness across the board, as several indicators—including job vacancies, redundancies, claimant rates, and labor market flows—are beginning to point toward stabilization.
Unemployment Rate Remains at 4.9 Percent
From a labor market perspective, the UK unemployment rate remained unchanged at 4.9 percent. The figure was slightly higher than the previous expectation of a decline to 4.8 percent.
Payroll data compiled by HM Revenue and Customs (HMRC) also showed a decline of around 13,000 employees on payrolls during the period.
Meanwhile, private-sector wage growth continued to slow. Average weekly earnings increased by 2.8 percent in the three months through July compared with the same period a year earlier.
Job Vacancies Begin to Stabilize
Although several indicators continue to point to weakness, there have also been some developments that are viewed as positive.
The number of job vacancies edged down to around 707,000, from 711,000 in the three months through July. The decline was relatively modest, while vacancies have remained within a narrow range throughout the year.
This could indicate that demand for labor in the UK is approaching a bottom.
The ratio of job vacancies to unemployed people has also remained relatively stable at 0.4 in recent months. This ratio is one of the indicators used to assess how tight or loose the labor market is.
Redundancies and Claims Decline
Further signs of stabilization can be seen in the number of redundancies. The figure fell to around 106,000, its lowest level since July 2025.
Meanwhile, the claimant rate also declined from 4.4 percent to 4.3 percent.
These developments suggest that pressure on the labor market is beginning to ease, although the improvement is not yet strong enough to signal a significant recovery.
Labor Market Activity Improves
Labor market flow indicators are also providing some positive signals.
The underemployment rate declined from 8.6 percent in the first quarter of 2026 to 8.0 percent in the second quarter of 2026.
The rate at which workers move from one job to another also increased, reaching 2.4 percent in the second quarter of 2026.
Meanwhile, the UK resignation rate rose to 0.8 percent. This marked the first increase since the spring of the previous year.
Central Bank Remains Cautious
According to Deutsche Bank, the latest developments are unlikely to be sufficient to significantly change the Monetary Policy Committee’s (MPC) outlook.
While the labor market is showing some early signs of stabilization, weakness in several key indicators is expected to keep the MPC cautious when considering its next policy decision.
Market attention will now turn to the UK inflation data. The figures are expected to play a more important role in determining the direction of monetary policy and the potential path of Bank of England interest rates.
Overall, the UK labor market remains relatively stagnant. However, stable job vacancies, declining redundancies and claimant rates, and increased labor market mobility offer signs that conditions may be entering a period of stabilization.(*)
