Pay growth in the private sector slowed to 2.8 per cent in the three months to June, the weakest rate in almost six years, while pay in the public sector rose by 6.1 per cent, according to figures from the Office for National Statistics published on Tuesday.
The annual rate of private sector pay growth was down from 2.9 per cent in the previous quarter and is the lowest since the three months to October 2020, during the coronavirus pandemic, the ONS said.
Public sector pay growth rose from 5.5 per cent in the previous three months. The ONS said the increase was driven by NHS staff receiving their pay award this year compared with 2025.
The unemployment rate held steady at 4.9 per cent. Vacancies fell by around 4,000 over the quarter to 707,000 in the three months to June, down from a peak of nearly 1.3 million in 2022 and the lowest level outside the pandemic since 2014, as job openings have continued to fall across the economy.
Single-month estimates for June alone, which the ONS says should be treated with caution, showed the unemployment rate climbed to 5.4 per cent from 4.6 per cent in May. The reliability of the ONS’s labour market data has weakened in recent years because of a decline in responses to the survey that underpins it.
Unemployment among people aged 18 to 24 edged down to 14.6 per cent from 14.8 per cent, although it remains close to an 11-year high. The economic inactivity rate, which measures the share of people not in work or looking for a job, was unchanged at 20.9 per cent.
Liz McKeown, director of economic statistics at the ONS, said: “Regular wage growth has remained broadly stable in recent months. However, private sector pay growth has continued to ease, while public sector pay growth remains elevated due to the timing of the latest NHS pay awards.
“The labour market picture is little changed overall, with some softening still evident. Employment, unemployment and inactivity rates have all remained steady, while the number of employees on payroll fell slightly in the latest quarter.”
The figures come as the Bank of England weighs its next move on interest rates. Bank Rate has been held at 3.75 per cent since December, and the Bank’s governor has played down the prospect of near-term cuts.
Yael Selfin, chief economist at KPMG UK, said the labour market figures “will provide the Bank of England with further evidence that its cautious approach to monetary policy remains the most appropriate path”.
She added: “Pay growth continues to show little sign of generating significant inflationary pressure, while wider labour market conditions appear to have bottomed out.”
James Smith, a developed markets economist at ING, said: “Barring a severe and persistent spike in energy prices [caused by the Middle East war], we think the Bank will keep rates on hold until next Spring, before cutting rates at least twice in 2027.”
After accounting for inflation, average pay excluding bonuses across the economy rose by 1 per cent in real terms in June, the ONS said, with real-terms pay under pressure in parts of the private sector. Inflation figures due on Wednesday are expected to show the annual rate climbed to 2.9 per cent in July from 2.6 per cent the previous month.
The ONS also said on Tuesday that productivity, measured by output produced per hour of work, rose by 0.7 per cent in the second quarter compared with the same period in 2025.
