This morning has brought us up to date on the latest UK employment and labourmarket statistics and the most timely one will have been accompanied by a sigh of relief from HM Treasury and Chancellor Rachel Reeves.
The early estimate of payrolled employees for July 2025 decreased by 164,000 (0.5%) on the year, and by 8,000 (0.0%) on the month, to 30.3 million. The July 2025 estimate should be treated as a provisional estimate and is likely to be revised when more data are received next month.
Some care is needed as that is another fall in payrolled employment. But it is on a smaller scale and comes after various private-sector surveys had suggested that things were getting worse. Below is the CIPD view from yesterday.
Employer confidence remains low, with the net employment balance at +9 – little changed from +8 last quarter and still among the lowest levels recorded outside the pandemic. Private sector hiring intentions are subdued, with just 57% planning to recruit in the next three months. Pay expectations remain at 3% – unchanged for five quarters.
The pay expectations figures may cheer those at the Bank of England who voted for an interest-rate cut last week. But not the Chancellor as should they come true real wage growth looks set to turn negative again. There was more gloom from the report below.
Another report, from KPMG and the Recruitment and Employment Confederation (REC), showed that recruitment across the UK fell sharply in July, for permanent and temporary jobs. This was often linked to employers’ gloomy outlook, and increased pressure on recruitment budgets.
Also the BDO released a downbeat survey on the state of the UK economy with a rather clear hint for likely employment.
Thus the government may well have been relieved that the payroll number was a smaller decline than we have seen. Indeed you could argue it is within the margin of error. The problem is that as I have pointed out before the rise in employer’s National Insurance has been followed by a decline in payroll employment in every subsequent month so far. Indeed one can also make a case for what in economics came under the concept of Rational Expectations. Because since the announcement of the National Insurance change last October payroll employment has fallen every month except one and that was only a 2000 rise.
Why do we look at Payroll Employment?
These are difficult times for official statistics. For example in the US we have seen President Trump fire the head of the Bureau of Labor Statistics and replace her with someone who has little experience in the area. But take care if you criticise from the UK as the sad reality is people like that have been running the UK Statistics Authority and Office for National Statistics for some time. You do not have to take my word for it as below is the head of the PACAC Committee from HM Parliament in the Financial Times.
Those working on our official statistics, including at the UK Statistics Authority (UKSA), which oversees the ONS, have been forced to acknowledge significant problems on several occasions before quickly reassuring us that they have it under control. Concerned that a deeper malaise was being deliberately hidden from view, the committee of MPs I chair took a closer look. I’m afraid what we’ve discovered was nothing short of staggering.
Let’s be clear: the leadership of our country’s vital statistical data function has overseen a catastrophic decline in standards.
I hope that there is genuine change and how about actually having respected statisticians running these organisations?
Another request I have made is for interview panels to include respected statisticians.
The interim head of the ONS Emma Rourke as far as I can tell is qualified in nursing for example.Anyway I have done my best to highlight issues with economic statistics and my submission to PACAC is number 16 should you wish to read it.
Returning to the issue of labour market statistics the reason payroll employment gets more emphasis now s that hopefully HMRC can count more accurately than the ONS. It is also more timely but has a clear weakness in the exclusion of the self-employed.
Workforce Jobs
Let me give you an example of a more official number.
The estimated number of WFJ increased to 37.1 million in the UK in March 2025, and continues to be at a historically high level, as described in our Vacancies and jobs in the UK: June 2025 bulletin. This is a rise of 187,000 (0.5%) since December 2024.
This shows a different picture of employment strength but is 4 months behind the tax data. I have looked at it before because it gave a more positive view of the UK employment situation than the headline Labour Force Survey. The problem right now with advancing that view is the other numbers we have from falling monthly GDP numbers for April and May plus the private-sector employment surveys I looked at earlier.
Wages and Real Wages
We see a sign of weakening here.
Annual growth in employees’ average earnings was 5.0% for regular earnings (excluding bonuses) and 4.6% for total earnings (including bonuses).
I am particularly thinking of the total pay numbers.
This is down from 5.0% in the previous three-month period. It was last lower than 4.6% in June to August 2024, when it was 4.1%.
This means that the situation regarding real wages is tightening if we use the measure the Bank of England targets.
Annual real total pay growth (using CPI) was 1.1% in April to June 2025. This is down from 1.7% in the previous three-month period. It was last lower than 1.1% in June to August 2023, when it was 1.0%.
Plus we do have a cost of living measure called the Retail Price Index and its monthly readings in this period were 4.5%, 4.3% and 4.4%.So whilst in literal terms we had a marginal rise, the more likely reality is that real wage growth has now stopped.
Official Employment
Things get a little awkward here.
In April to June 2025, the estimated UK employment rate increased 0.3 percentage points to 75.3%, the UK unemployment rate increased 0.1 percentage points to 4.7%, and the UK economic inactivity rate decreased 0.4 percentage points to 21.0% compared with January to March 2025.
Whilst I would love to believe the UK employment rate rose I do not believe that if we look at all the other available data. But there is something welcome here and I can take credit for pointing out that I thought it was on the cards. Remember when the think-tanks and chattering classes said inactivity was a crisis? Well I was right to point out we have seen big changes and it should begin to settle down, Much of this is around swings in student numbers whilst there are concerns about the level of long-term sickness.
Hours Worked
This also provided a more positive number.
Total actual weekly hours worked increased in the latest quarter (Apr to June 2025) and over the year. Both men’s and women’s working hours increased in the latest quarter and over the year.
It rose by 10.5 million hours this quarter to 1092.6 million.
Comment
One message today is how poorly we measure things at the moment as we have numbers heading in pretty much every direction. Large sums of money are spent on the official statistics for them to muddy the waters. There is a hint or two that the rate of decline has slowed so let is cross our fingers and hope that proves to be true.
