UK unemployment falls as payrolls stabilise; Deutsche Bank sees November rate hike Proactive uses images sourced from Shutterstock
UK unemployment fell to 5% in the three months to August as payroll employment returned to growth, adding to signs that the labour market may be stabilising.
Official figures showed employment increased by 102,000 over the quarter to 34.6 million, while economic inactivity edged down to 21%.
Payroll employment rose by 13,000 in September, its strongest monthly increase since August 2025, although the total remained 66,000 lower than a year earlier.
Wage growth also remained firm, with regular pay rising 4% year on year and total pay increasing at the same rate.
Public-sector regular pay increased 6%, compared with 3% growth in the private sector.
However, vacancies fell by 21,000 to 691,000 in the three months to September, showing that demand for workers remains subdued despite the improvement in employment measures.
Deutsche Bank chief UK economist Sanjay Raja said the figures reinforced evidence that the labour market is beginning to stabilise after a prolonged slowdown.
He said the improvement should support government tax receipts, while stronger employment and wage growth suggested less spare capacity in the economy than previously thought.
For the Bank of England, Deutsche Bank said the data strengthened the case for another interest-rate increase, particularly with inflation expected to move above 4% in the coming months.
Unless Wednesday’s inflation figures deliver a significant downside surprise, Raja said a November rate hike now looks increasingly likely.