Informative · Labour

The Office for National Statistics just delivered a pre-Budget jobs boost and employers still are not hiring

20 October 2026 · 20 October 2026Share

A woman sits at a desk in an office environment using a computer. File photo. Shixart1985 · CC BY 2.0

UK unemployment just fell to 4.7%. That's the lowest it's been in more than a year.

The Office for National Statistics put out the figures this morning. They cover the three months to August 2026.

So here's why that's a surprise. The rate was 4.9% in the three months to July. Economists expected it to rise to about 5.0%. Instead it dropped.

And the other numbers moved the right way too. The employment rate climbed from 75.1% to 75.3%. Payrolled employee numbers went up by about 13,000 between August and September, to 30.3 million.

Wages rose as well. Regular pay, before bonuses, grew 3.7% in the three months to August. Inflation is running at 3.1%. So after inflation, that's a real pay rise of 0.8%.

But total pay, including bonuses, actually eased. It went from 3.9% down to 3.7%. That's its weakest pace since 2020.

So the headline numbers look good for the government. Now look underneath them.

Job vacancies fell by 21,000, down to 691,000, in the three months to September. That's the lowest non-pandemic level since 2014. Businesses are not hiring, even while unemployment falls.

Smaller businesses say the cost of employing people has gone up. That's their explanation. It's what the data points towards.

And there's another number pulling the other way. The number of people claiming unemployment-related benefits rose by about 30,300 in September, to roughly 1.7 million. That's far more than the 19,400 rise that was expected.

So one measure says people are moving into work. Another says firms have stopped advertising for staff, and more people are signing on.

The rest of this story is for Silver and Gold members.

Office and commercial buildings in London's Central Business District. — The Central Business District of London showing the concentration of office and commercial buildings. File photo. Colin Smith · CC BY-SA 2.0

David Freeman, the ONS deputy director of labour market statistics, says quote "the employment rate edging up and a small drop in unemployment".

That's the ONS itself saying this isn't a boom. It's a flat market, nudging in different directions depending on which number you look at.

David Freeman also says the vacancies fall is the largest since the start of the year.

He says that fall is concentrated mainly in smaller businesses, and they point to higher labour costs as a key factor.

Now, the timing. These figures land a week before the Budget on 28 October. That's when the Chancellor, John Healey, sets out the government's tax and spending plans.

He hasn't commented on these figures yet. The government has made no official response.

So what happens next? There are warning signs further out. GB News reports that Barclays forecasts UK unemployment will average 5.7% in 2027. That's up from Barclays' earlier forecast of 4.9%.

And for young people, it's worse than the headline rate suggests. GB News reports that nearly a million people aged 16 to 24 are not in education, employment or training. Around 39% of them are unemployed. The rest are counted as economically inactive.

It's not yet known whether the Bank of England will treat this fall as a reason to consider raising interest rates in November, or whether it will wait to see if the trend holds.

It's also not known whether next month's figures confirm a genuine turn in the jobs market, or whether this is just a one-month blip.

For now, the government has one good headline number to take into the Budget. And a vacancies count that says employers are not convinced the recovery is real.

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The Office for National Statistics just delivered a pre-Budget jobs boost and employers still are not hiring

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