This article is from the source 'guardian' and was first published or seen on . The next check for changes will be

You can find the current article at its original source at https://www.theguardian.com/business/2025/sep/16/uk-labour-market-pay-growth-job-losses-rachel-reeves

The article has changed 6 times. There is an RSS feed of changes available.

Version 3 Version 4
UK labour market cools as pay growth slows and job losses rise UK state pension likely to rise by 4.7% under triple lock
(about 5 hours later)
ONS figures come as the government is under pressure to revive Britain’s economy before the budget Increase will put further pressure on Rachel Reeves as ONS figures show pay growth slowing and job losses rising
Explainer: what is the triple lock, and could it be ditched?
UK pay growth stays high – but Britons are feeling the pinchUK pay growth stays high – but Britons are feeling the pinch
Business live – latest updatesBusiness live – latest updates
The UK’s jobs market has continued to cool, according to official figures, amid a slowdown in annual pay growth and rising redundancies. Millions of people are poised for an above-inflation 4.7% increase in their state pension payments, adding to pressure on the government finances as Rachel Reeves explores raising taxes at the autumn budget.
Figures from the Office for National Statistics (ONS) show annual growth in regular earnings, excluding bonuses, slowed to 4.8% in the three months to July, down from 5% in the three months to June, matching the forecasts of City economists. Labour has committed to retaining the triple lock on the state pension, which guarantees annual increases in line with whichever is the higher of 2.5%, inflation in September or annual earnings growth in the three months to July.
The official unemployment rate was unchanged on the previous month in July, at 4.7%, the highest level in four years, also matching predictions. This edged up from 4.6% in the previous three months and above estimates of a year ago amid a broad-based slowdown in hiring, falling job vacancies, and rising unemployment-related benefit claims. Official figures published on Tuesday show average weekly earnings including bonuses were 4.7% higher in May to July than in the same period a year earlier.
“The labour market continues to cool, with the number of people on payroll falling again, while firms also told us there were fewer jobs in the latest period,” said the ONS director of economic statistics, Liz McKeown. Experts said the increase put state pensioners in line for their payments to go up by that amount from next April because inflation in September – currently running at 3.8% – was unlikely to be higher.
“Wage growth excluding bonuses edged down further in cash terms, though it remains strong by historic standards.” A final decision will be taken by the government before the budget. However, Pat McFadden, the work and pensions secretary, confirmed on Tuesday that the triple lock promise would be honoured.
The latest figures are expected to confirm a boost worth hundreds of pounds for millions of pensioners. Average earnings including bonuses in the three months to July, which are used to calculate the pensions triple lock, grew by 4.7%. “That’s a commitment from the Labour government to the UK’s pensioners,” he said. “It’s something that we said we’d do at the election and something that we will keep to.”
Helen Morrissey, the head of retirement analysis at Hargreaves Lansdown, said such an increase would see a full new state pension rise from its current level of £230.25 a week to £241.05 per week from April. The latest figures are expected to translate into an annual rise worth more than £500 for those on the new state pension, which would increase from £230.25 a week to £241.05 a week from April. Those retiring on the basic state pension would see their weekly income increase from £176.45 a week to £184.75.
Those retiring on the basic state pension would receive a rise in weekly income from £176.45 a week to £184.75. The government is yet to confirm the increase. Successive governments have committed to the triple lock since it was first introduced by George Osborne in 2010, despite criticism that protecting pensioner incomes comes with a costly price tag for the public purse and risks fuelling intergenerational inequalities.
Labour has committed to retaining the triple lock on the state pension, which guarantees annual increases in line with whichever is the higher of inflation, 2.5% or annual earnings. The Office for Budget Responsibility projects that state pension costs will rise from about 5% of GDP now to about 8% by the 2070s. Half of the increase is driven by the triple lock, at a time of rising pressure on other areas of spending and social care.
The chancellor, Rachel Reeves, is under pressure to revive Britain’s economy before her 26 November budget, amid fierce criticism of Labour’s economic management and concerns over the strength of the public finances. The Institute for Fiscal Studies has called for the policy to be scrapped. Heidi Karjalainen, a senior research economist at the thinktank, said: “The triple lock has so far been much costlier than initially expected, and it creates a lot of uncertainty in terms of future spending.
Business groups have complained since Reeves’s first autumn budget that her £25bn increase in employer national insurance contributions and 6.7% rise in the “national living wage” would force them to cut jobs and raise prices for consumers. “If the economy is doing well then it won’t cost more than increasing the state pension in line with average earnings growth, whereas in volatile periods it can become very costly – as we have seen in the last decade and a half.”
The ONS’s figures are based on its widely criticised labour force survey, which has suffered from collapsing response rates. Experts have argued this leaves policymakers “flying blind”, creating the prospect that decisions are being taken based on flawed data. It comes as official figures showed the UK’s jobs market has continued to cool, amid a slowdown in annual pay growth and rising redundancies.
However, economists said there was clear evidence of the jobs market cooling. Separate figures from HMRC showed a decline in the number of workers on company payrolls of 8,000, matching City forecasts. The early estimate for the number of payrolled employees, which can be prone to revision, was down by 127,000 compared with a year earlier. The ONS said annual growth in regular earnings excluding bonuses slowed to 4.8% in the three months to July, down from 5% in the three months to June, matching the forecasts of City economists.
Suren Thiru, the economic director at the Institute of Chartered Accountants in England and Wales, said: “These figures suggest that the UK’s jobs market is wilting under the weight of a stagnating economy and skyrocketing staffing costs as more businesses aim to shrink their workforce in response to these twin headwinds. The official unemployment rate was unchanged on the previous month in July, at 4.7%, the highest level in four years.
Sign up to Business TodaySign up to Business Today
Get set for the working day – we'll point you to all the business news and analysis you need every morningGet set for the working day – we'll point you to all the business news and analysis you need every morning
after newsletter promotionafter newsletter promotion
“While the pace at which pay growth is slowing remains painfully pedestrian, its current downward trajectory should gather momentum over the autumn as the eye-watering financial squeeze on businesses takes its toll on pay awards.” Business groups have complained since Reeves’s first autumn budget that her £25bn increase in employer national insurance contributions and 6.7% rise in the “national living wage” would force them to cut jobs and raise prices for consumers.
Economists said there was clear evidence of the jobs market cooling. Separate figures from HMRC showed a decline in the number of workers on company payrolls of 8,000, matching City forecasts.
After taking account of inflation, annual growth in regular pay was 1.2% in the three months to July, down from 1.5%.After taking account of inflation, annual growth in regular pay was 1.2% in the three months to July, down from 1.5%.
Reeves is widely expected to raise taxes in her autumn budget. However, business leaders have warned a weaker growth outlook will make it harder for her to raise taxes without further harming the economy.Reeves is widely expected to raise taxes in her autumn budget. However, business leaders have warned a weaker growth outlook will make it harder for her to raise taxes without further harming the economy.
Daisy Cooper, the Liberal Democrat Treasury spokesperson, said Labour had committed an act of “self sabotage” by pushing more people out of work. “[It has put] even more pressure on already stretched public services and leaving businesses scrambling just to keep the lights on.”Daisy Cooper, the Liberal Democrat Treasury spokesperson, said Labour had committed an act of “self sabotage” by pushing more people out of work. “[It has put] even more pressure on already stretched public services and leaving businesses scrambling just to keep the lights on.”
Strong wage growth has caused a headache for the Bank of England by stoking inflationary pressures, putting further interest rate cuts at risk after four reductions in the past year. However, a deeper slowdown in the jobs market could show the economy is deteriorating, supporting faster rate cuts.Strong wage growth has caused a headache for the Bank of England by stoking inflationary pressures, putting further interest rate cuts at risk after four reductions in the past year. However, a deeper slowdown in the jobs market could show the economy is deteriorating, supporting faster rate cuts.
The Bank is widely expected to keep its base rate unchanged at 4% at its next policy meeting on Thursday. City investors predict stubbornly high inflation could lead the central bank to keep rates on hold until spring next year, with a quarter-point reduction not fully priced in by markets until April 2026. The Bank is expected to keep its base rate unchanged at 4% at its next policy meeting on Thursday.
Official figures due on Wednesday are expected to show the UK’s headline inflation rate held steady at 3.8% in August, almost twice the Bank’s 2% target rate.