Vacancies fall to lowest level in over a decade as wage growth edges above inflation, adding to rate uncertainty
The UK jobs market showed further signs of stagnation in the latest data from the Office for National Statistics (ONS), with employers remaining reluctant to take on new staff amid rising costs and wider economic uncertainty.
Payrolled employees fell by 78,000 over the year to June. An early estimate for July points to a further annual decline of 94,000. The unemployment rate held at 4.9%.
Vacancies slipped to 707,000 — the lowest level outside the pandemic since late 2014 — with the financial commentators noting that smaller firms cited higher labour costs and operating expenses as reasons for restraint on recruitment.
"With economic uncertainty so high, and payroll taxes increasingly onerous, it's not surprising many UK employers are staying cautious, and unwilling to take the risk of hiring new staff," said Susannah Streeter (pictured right), chief investment strategist at non-advisory investment broker Wealth Club.
The latest ONS labour market figures also showed that regular pay growth edged up to 3.5% in the year to June, from 3.4% previously, remaining above both inflation and the Bank of England's 2% target.
Streeter noted the increase was largely driven by higher pay settlements in the public sector, though private sector employers could face pressure to match those deals. She warned that policymakers would monitor closely whether higher payroll costs were being passed through to the prices of goods and services.
Regular wage growth in the three months to June 2026 was 3.5% excluding bonuses, up on the previous period.
— Office for National Statistics (ONS) (@ONS) August 18, 2026
Including bonuses the rate was 4.1%, down from the previous period.
Read the release ➡ https://t.co/8FKHMf2iHI pic.twitter.com/FyDXTJyGTT
Markets are currently pricing in two interest rate increases over the next 12 months, given the potential for renewed inflationary pressure.
The prospect of two further Bank of England rate increases over the coming year carries direct consequences for the mortgage market. Should the base rate rise, lenders are likely to reprice fixed-rate products upward, squeezing affordability for prospective buyers and increasing pressure on borrowers approaching the end of existing fixed terms. Swap rates, which underpin fixed mortgage pricing, have already been sensitive to shifting expectations around the rate path, and any sustained upward movement in gilt yields could reinforce that trend.
Streeter described the labour market picture as one of businesses "hunkering down" rather than investing in expansion — a dynamic she said did not bode well for UK growth prospects. Beyond taxes and payroll costs, she said higher energy bills were also weighing on budgets.
Energy costs add to inflationary pressures
Brent crude climbed above $91 a barrel amid renewed tensions in the Middle East, marking a third consecutive session of gains. The rally followed comments by US President Donald Trump threatening military action against Oman after a temporary ceasefire with Iran expired without a deal. Trump expressed frustration that Oman and Iran were engaged in negotiations to reopen the Strait of Hormuz without US involvement.
Streeter said higher energy prices risked feeding through into transport, manufacturing and household bills, complicating efforts to bring inflation under control and forcing markets to reassess how long interest rates would remain elevated.
Bond yields surge to multi-decade highs
Government bond markets came under significant pressure globally. The yield on the US 30-year Treasury moved above 5.32%, its highest level since June 2007. UK gilt yields also rose towards levels last seen in the aftermath of the financial crisis, and France's 30-year borrowing costs climbed to their highest since 2008.
Streeter said investors were demanding higher returns to hold long-dated government debt as fears mounted that inflation could prove more persistent than anticipated, compounded by concerns about the scale of government borrowing across major economies.
The Japanese yen remained weak despite the Bank of Japan's bond yields rising to multi-decade highs on expectations of further rate increases. Streeter noted that Japanese interest rates remained well below those available in the US and other countries, leaving the yen caught in what she described as a "doom loop" as investors continued to seek higher returns elsewhere.
"We may have seen a remarkable bout of currency intervention, with Japan selling dollars and buying the yen, and the US Treasury also stepping in to support the currency," she said. "But the effect has proved short-lived, with powerful currents in global bond markets continuing to overwhelm those efforts."
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