ONS Labour Market Overview - October 2026

As of October 2026, we’ve reviewed the latest UK labour market figures from the Office for National Statistics (ONS), covering June to August 2026 alongside early indicators for September. The latest data suggests the labour market remains broadly flat, with employment rising slightly, unemployment edging lower and economic inactivity continuing to fall. However, recruitment demand has weakened further, payroll employment remains below year-earlier levels and total pay growth has slowed to its lowest rate in almost six years.

While headline measures remain relatively stable, businesses continue to take a cautious approach to hiring. Falling vacancy levels and ongoing concerns around labour costs indicate that many employers are remaining selective when expanding their workforce as 2026 enters its final months.

Key Findings

Payrolled Employees

HMRC Real Time Information data shows payroll employment remains weaker than a year ago.

The number of payrolled employees fell by 111,000 (0.4%) between August 2025 and August 2026, although it remained largely unchanged on the month, increasing by 1,000 between July and August 2026.

Across the June to August period, which is comparable with Labour Force Survey estimates, payrolled employment fell by 37,000 (0.1%) on the quarter and by 92,000 (0.3%) on the year.

Early estimates for September suggest little further movement. Payrolled employment increased by 13,000 on the month to 30.3 million, although it remained 66,000 (0.2%) lower than September 2025. The September estimate is provisional and may be revised.

Employment and Unemployment

The headline employment picture strengthened modestly during June to August 2026.

The UK employment rate for people aged 16 to 64 was estimated at 75.3%, up 0.2 percentage points on both the quarter and the year. Employment reached a record level of 34.577 million people aged 16 and over.

The unemployment rate fell to 4.7%, down 0.1 percentage points on both the previous quarter and the previous year. Unemployment levels fell by 47,000 on the quarter to 1.712 million.

Economic inactivity among those aged 16 to 64 remained at 20.9%, down 0.1 percentage points on the quarter and 0.2 percentage points compared with a year ago.

Together, these figures suggest a labour market that remains resilient at headline level despite signs of cooling demand elsewhere.

Vacancies and Claimant Count

Recruitment demand continued to ease during the latest period.

The UK recorded an estimated 691,000 vacancies between July and September 2026, a fall of 21,000 (2.9%) compared with April to June 2026. This was the largest quarterly decline since the start of the year and leaves vacancies 37,000 (5.1%) lower than a year earlier.

Outside of the pandemic period, vacancy levels have not been this low since July to September 2014. Feedback from the ONS Vacancy Survey continues to indicate that some smaller employers are holding back from recruitment because of increased labour costs.

The UK Claimant Count increased both monthly and annually to an estimated 1.701 million in September 2026. This figure remains provisional and may be revised in future releases.

Earnings Growth

Wage growth remained relatively stable, although total pay growth continued to moderate.

Annual growth in regular earnings, excluding bonuses, was 3.7% in June to August 2026. This follows a period of relative stability after the sharper slowdown seen during 2025.

Annual growth in total earnings, including bonuses, was also 3.7%, down from 3.9% in the previous three-month period. According to the ONS, this was the lowest rate of total pay growth since August to October 2020.

The contrast between public and private sector earnings growth remains notable. Regular pay increased by 6.3% in the public sector compared with 3.0% in the private sector, although the timing of public sector pay awards continues to influence these comparisons.

After adjusting for inflation using CPIH, regular pay increased by 0.6% in real terms and total pay increased by 0.7%.

Workforce Jobs

The number of workforce jobs was estimated at 36.734 million in June 2026.

This represented a quarterly decrease of 48,000 (0.1%), driven largely by a fall of 43,000 in self-employment jobs. Employee jobs were broadly unchanged, decreasing by 10,000 on the quarter.

The annual picture remained modestly positive, with workforce jobs increasing by 60,000 (0.2%) compared with June 2025. Employee jobs rose by 46,000 over the year.

Public Sector Employment

Public sector employment continued to grow during 2026.

Public sector employment reached 6.207 million in June 2026, an increase of 11,000 compared with March 2026 and 33,000 higher than June 2025.

Labour Market Outlook

The latest figures point to a labour market that remains stable overall but continues to show signs of softer recruitment activity.

Employment has increased, unemployment has fallen and economic inactivity continues to trend downward. However, payroll employment remains below year-earlier levels, vacancy numbers have fallen to their lowest level outside the pandemic period since 2014, and total pay growth has slowed significantly.

For employers, the data suggests that hiring conditions are likely to remain mixed. While the labour market is far from weak, increased labour costs and subdued vacancy levels indicate businesses are continuing to adopt a measured approach to recruitment. As the final quarter of 2026 progresses, organisations are likely to remain selective when adding headcount, with competition for specialist skills continuing to vary between sectors.

Source: Labour market overview, UK – Office for National Statistics (ONS)