UK Unemployment Falls to 4.7% as Vacancies Hit Five-Year Low

The Office for National Statistics reported that the United Kingdom's unemployment rate unexpectedly fell to 4.7% in the three months to August, down from 4.9%. This represents the lowest unemployment level since July 2025. Payrolled employees increased by 13,000 between August and September, reaching a total of 30.3 million.

Despite the drop in unemployment, job vacancies fell by 21,000 to 691,000 in the three months to September, marking a five-year low. This decline was the largest since the start of the year and was driven largely by smaller businesses citing increased labour costs. Average regular earnings growth rose to 3.7%, slightly exceeding economist expectations of 3.6%, while total earnings including bonuses fell to 3.7%, the lowest rate in nearly six years.

The tighter labor market and the fact that pay growth continues to outstrip inflation have increased expectations that the Bank of England will raise its key interest rate to 4.0% in November to prevent further price rises. The pound gained against the dollar following the data release. These figures provide the economic context for the upcoming budget scheduled for 28 October.