UK unemployment for May to July 2026 came in at 4.9% according to the latest figures released by the ONS, a 0.2 rise on the year, but mostly unchanged from the prior quarter.
Economic inactivity remained similarly static, coming in at 20.9%, down just 0.1 percentage point from the previous quarter.
Finally, payrolled employee numbers fell by a further 101,000 between July 2025 and July 2026.
Richard Carter, head of fixed interest research at Quilter Cheviot, said: “The UK jobs market still appears to be stuck in a slump.”
However, he also noted it may have reached some form of a bottom, as the pace of deterioration in the job market appears “less dramatic than it was earlier this year”.
“However, jobs data are no longer the only, or even the primary, concern for policymakers,” Carter said. “The labour market is undoubtedly cooling, but if energy costs continue to feed through into broader inflation, policymakers may find themselves balancing a weakening jobs market against renewed price pressures.”
Danni Hewson, AJ Bell head of financial analysis, was more optimistic. “Resilient is a word that has been used to describe the UK economy a lot this year, and looking at the latest jobs data there will be relief in the government that the unemployment rate has held steady over the three months to July,” she said.
However, she noted the steady rate of decline will be “cold comfort” as job searchers have become aware that the pickings have become slimmer, and vacancies have hit a fresh five-year low.
This will, unsurprisingly, feed into rate expectations, with Hewson noting market expectations of a hike from the Bank of England are currently hovering around 33%, even with upcoming inflation data expected to rise above the bank’s targets.
See also: Infundly appoints Ben Yearsley and Gavin Haynes to advisory board
“Today’s unemployment data does show resilience, but that resilience is expected to be tested in the coming months as Budget speculation permeates the psyche of businesses and consumers alike,” Hewson said.
Susannah Streeter, chief investment strategist at the Wealth Club, added the “awkward” jobs data may continue to puzzle central bankers.
“Fewer vacancies, falling payroll numbers and cautious employers point to an economy losing some of its hiring power, just as higher energy costs descend,” she said. “Policymakers at the Bank of England will be mindful that the economy is struggling to gain momentum, yet some are increasingly concerned about the rising inflationary risks.
“So, the spectre of stagflation is still looming over the UK economy,” Streeter said.
While Streeter broadly agreed a hold was more likely at this week’s MPC meeting, she pointed to the four interest rate hikes now being priced in by the market and the uncomfortable implications for household finances.
Meanwhile, Felix Feather, an economist at Aberdeen, predicted just two hikes from the Bank of England in the coming months, in November 2026 and February 2027.
“More fundamentally, the medium-term trend level of interest rates might have moved higher recently due to greater demand for financing from governments and AI hyperscalers. We therefore expect the UK’s interest rates.
“We therefore expect the UK’s interest rates to settle higher than previously thought.”
See also: Nedgroup: Half of investors now see alignment as ‘main plus’ of boutiques
