Introduction: UK unemployment rate falls in pre-budget boost
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The UK unemployment rate has fallen, in a pre-budget boost to chancellor John Healey, but the number of vacancies available for workers continues to shrink.
The latest data on the UK labour market, just released, shows that the UK unemployment rate fell to 4.7% in June to August, down from 4.9% a month ago.
That’s better than expected – City economists had forecast a rise to 5%.
In its final snapshot of Britain’s jobs market ahead of the budget in two week’s time, the Office for National Statistics reports that employment rose, by 102,000 jobs, to 34.577m in the last quarter.
The number of people unemployed fell by 47,000 in the quarter to 1.712m, and there was a small (16,000) drop in the number of people ‘economically inactive’, to 9.091m.
But worryingly, the number of vacancies has seen its largest fall since the start of the year, falling by 21,000 in the last quarter.
That pulled the number of vacancies down to 691,000 in July to September, down from over 1.2m in early 2022. This is the first time the total has been below 700,000 since February to April 2021.
The ONS says:
double quotation markThis is mainly from smaller firms, who continue to suggest that they may not be recruiting because of increased labour costs.
That’s a reference to the higher employer National Insurance Contributions (NICs) brought in by Healey’s predecessor, Rachel Reeves, and the rise in the minimum wage, which have made it costlier to hire staff.
More to follow….
The agenda
7am BST: UK labour market data
10am BST: ZEW index of eurozone economic sentiment
10am BST: Eurozone construction output for August
2.30pm BST: BIST Committee questions Secretary of State Jonathan Reynolds
Updated at 02.52 EDT
Key events
South Korean data centre firm Elice plunges in trading debut
Over in Seoul, shares of data-center infrastructure company Elice plunged as it made its trading debut.
Elice’s hopes of making a big splash on the stock market turned into a belly flop, as its shares ended its first day of trading down 32% – raising fears that the AI boom might be faltering.
According to Bloomberg data, this is the worst-ever opening day for a sizable Korean IPO.
They report:
double quotation mark“Elice’s debut comes at a time when sentiment toward AI infrastructure companies has weakened, particularly in the US,” said Albert Yong, managing partner and chief investment officer at Petra Capital Management. “Sentiment toward AI infrastructure has been highly volatile and often disconnected from underlying fundamentals.”
Elice describes itself as an “AI Full Stack Company”, providing AI education, cloud infrastructure, and other services which “organizations need for AI transformation”.
It’s already been a turbulent year for the Korean stock market. The KOSPI index doubled in value in the first half of 2026, but then fell by almost a fifth in July-September.
Shares have dipped in London, and across Europe, in early trading as the political crisis in France worries investors.
The FTSE 100 share index has dropped by 45 points, or 0.42%, to 10,719 points, adding to yesterday’s losses.
That has helped to pull the pan-European Stoxx 600 index down by 0.4%. France’s CAC index has lost 0.3% while Germany’s DAX is down 0.7%.
Investors remain concerned that the protests that rocked France last weekend will hamper efforts to cut spending.
Capital Economics told clients:
double quotation markFrance appears to be heading for a fiscal crisis which could lead to contagion and potentially a recession in the euro-zone. However, several factors mean the contagion risks to other countries’ bond markets and economies are lower than they were during the sovereign debt crisis of the early 2010s.
ShareMcFadden: UK’s employment rate now the third highest in the G7
Secretary of State for Work and Pensions Pat McFadden says:
double quotation mark“Today’s figures show the resilience of our labour market with unemployment falling and the UK’s employment rate now the third highest in the G7, despite a backdrop of global uncertainty.
“But too many young people still find themselves locked out of employment. That’s why are working with industry, to bring young people back into the labour market and prevent them from drifting into the welfare system.
“The hospitality and retail sectors have committed to 200,000 jobs for young people not in education, work or training through this partnership, to give them the opportunities they need to get started and build a successful career.”
SharePound jumps after UK jobs report
The pound has rallied after Britain’s unemployment rate fell unexpectedly this morning to 4.7%.
Sterling has gained half a cent against the US dollar to $1.3352, as the City welcomes the news that employment rose in the last quarter.
The pound is also up 0.2% against the euro to €1.1888, close to the 17-month high touched yesterday.
Traders may be concluding that a stronger-than-expected jobs market will give the Bank of England confidence to raise interest rates to fight inflation.
Chris Beauchamp, chief market analyst at IG says sterling is “rampant” after the UK employment data.
double quotation mark“This data has caught the market on the hop, with traders scrambling to respond and boost exposure to the pound. Good news has been a touch more prevalent for the UK of late, which is just the kind of framing the government needs heading into the budget, though signs of more resilience in the labour market do of course mean the BoE has more room to respond to higher inflation.”
The money markets indicate there’s a 95.5% chance that the Bank raises interest raatest at its next meeting in November, to 4%. Three further rate rises are expected in 2027.
Here’s Stephen Evans, chief executive at Learning and Work Institute (L&W), on the situation in the UK jobs market:
double quotation mark“The labour market remains relatively flat overall. This resilience in the face of headwinds driven by global events is welcome. But underlying problems remain, with around one million young people not in education, employment or training and overall employment more than two million short of the Government’s 80% employment rate target.
To fix those challenges we need to change the benefit system so it offers active help to all who need it, but also make it easier for employers to create jobs. “
Another interesting line in today’s jobs report is that the number of workers on company payrolls has risen.
Payrolls increased by 13,000 in September, to around 30.3m.
But that’s still 66,000 lower than a year ago.
ShareUK suffering ‘jobs drought’ as vacancies drop
The government should not be complacent about the state of the labour market ahead of next week’s budget, warns Ben Harrison, director of the Work Foundation at Lancaster University:
Harrison explains:
double quotation markThe UK is still amidst a jobs drought with vacancies at their lowest for over 12 years outside of the pandemic.
“In particular, there are now 715,000 young people aged 16–24 unemployed, down by 28,000 on the quarter. Nevertheless, the number of young people out of work remains 54,000 higher than 12 months ago.
“For too many young people there are simply not enough suitable jobs available to them. Overall, vacancies have fallen to 691,000 – the lowest level outside the pandemic since 2014 – while Work Foundation research shows that adverts for starter jobs have almost halved over the past.
Here’s ONS deputy director of labour market statistics, David Freeman, on today’s jobs data:
double quotation mark“While the labour market remains broadly flat in 2026, data from the latest quarter shows the employment rate edging up and a small drop in unemployment. The number of workers on payroll remains slightly down over the same period, though data for the most recent month suggests that might be starting to level off.
“The number of vacancies has seen its largest fall since the start of the year, concentrated mainly within smaller businesses, which cite increased labour costs as a key factor.
“Regular wage growth remained relatively stable, though total pay – including bonuses – has eased to its lowest rate in nearly six years.”
SharePublic sector pay outpaces private sector, but….
Pay continued to rise faster in the public sector than in the private sector, today’s labour market report shows.
Regular annual growth was 3.0% for the private sector and 6.3% for the public sector.
But as the ONS points out, public sector pay growth continues to be affected by variations in the timings of pay awards this year – largely to do with pay deals in the NHS.
Photograph: ONSShare
Updated at 02.29 EDT
Real wage growth remains weak
Once you account for inflation, UK real wage growth remained below 1% last month.
Annual real regular pay growth was broadly unchanged at 0.8% in June to August, the ONS reports, based on the CPI inflation measure.
Annual real total pay growth (using CPI) was 0.9% in June to August 2026, a slight decrease.
ShareA mixed picture on wage growth
Regular pay growth rose in the last quarter, today’s labour market report shows.
But once you account for bonuses, wage growth slowed.
The ONS reports that regulator pay grew by 3.7% in the June-August quarter, up from 3.6% a month ago.
But growth in total pay (including bonuses) was 3.7% in June to August 2026, down from 3.9% in May-July.
ShareConstruction led fall in vacancies
Vacancies fell particularly sharply across the construction sector, suggesting Britain’s builders cut back on hiring last summer.
The ONS reports:
Vacancy estimates decreased on the quarter, with early estimates for July to September 2026 suggesting a decrease of 21,000 (2.9%) vacancies to 691,000, compared with April to June 2026; this is the first time the total has been below 700,000 since February to April 2021.
Vacancy estimates decreased in 14 of the 18 industry sectors, compared with April to June 2026; the largest industry decrease was in construction (down 7,000 vacancies).
Vacancy estimates decreased in 4 of the 5 employment size bands, compared with April to June 2026; the largest decrease was for businesses with 1 to 9 employees (down 21,000 vacancies).
ShareIntroduction: UK unemployment rate falls in pre-budget boost
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The UK unemployment rate has fallen, in a pre-budget boost to chancellor John Healey, but the number of vacancies available for workers continues to shrink.
The latest data on the UK labour market, just released, shows that the UK unemployment rate fell to 4.7% in June to August, down from 4.9% a month ago.
That’s better than expected – City economists had forecast a rise to 5%.
In its final snapshot of Britain’s jobs market ahead of the budget in two week’s time, the Office for National Statistics reports that employment rose, by 102,000 jobs, to 34.577m in the last quarter.
The number of people unemployed fell by 47,000 in the quarter to 1.712m, and there was a small (16,000) drop in the number of people ‘economically inactive’, to 9.091m.
But worryingly, the number of vacancies has seen its largest fall since the start of the year, falling by 21,000 in the last quarter.
That pulled the number of vacancies down to 691,000 in July to September, down from over 1.2m in early 2022. This is the first time the total has been below 700,000 since February to April 2021.
The ONS says:
double quotation markThis is mainly from smaller firms, who continue to suggest that they may not be recruiting because of increased labour costs.
That’s a reference to the higher employer National Insurance Contributions (NICs) brought in by Healey’s predecessor, Rachel Reeves, and the rise in the minimum wage, which have made it costlier to hire staff.
More to follow….
The agenda
7am BST: UK labour market data
10am BST: ZEW index of eurozone economic sentiment
10am BST: Eurozone construction output for August
2.30pm BST: BIST Committee questions Secretary of State Jonathan Reynolds
Updated at 02.52 EDT