Data Release

ONS · Labour Market Overview & Average Weekly Earnings · August 2026 · Released 18 August 2026

The pay-growth gap blows wider as Britain's jobs market keeps cooling

Unemployment sits at 4.9%, vacancies have fallen to 707,000 — their lowest outside the pandemic since 2014 — and payrolls keep shrinking. Underneath it, the labour market is now paying two very different wage settlements: public sector regular pay growth jumped to 6.1%, while private sector pay growth slipped to 2.8%, its weakest showing in almost six years. The gap between the two has widened to 3.3 percentage points.

The jobs market

4.9%

Unemployment · Apr–Jun · +0.2pp on year, −0.1pp on quarter

707k

Vacancies · May–Jul · lowest since 2014 outside Covid

30.3m

Payrolls · Jul flash · −94,000 (0.3%) on year

The pay-growth divergence

6.1%

Public sector regular pay growth · up from 5.5%

2.8%

Private sector regular pay growth · lowest since Aug–Oct 2020

3.3pp

Public–private pay-growth gap · up from 2.6pp last period

Key Points

Unemployment held close to 4.9% in the three months to June — up 0.2 points on the year but down 0.1 on the quarter. Employment was 75.1% (−0.2pp on year, +0.1pp on quarter); inactivity was flat at 20.9%.
Vacancies kept falling. The May–July estimate of 707,000 was down 6,000 on the quarter and 11,000 since the start of the year. Outside the pandemic, the last time vacancies were this low was September–November 2014.
Payrolls fell again. HMRC's June figure was down 78,000 (0.3%) on the year; July's flash estimate — provisional and likely to be revised — puts payrolls at 30.3 million, down 94,000 (0.3%) on the year and broadly flat on the month.
Regular pay growth edged up to 3.5% in the three months to June, from 3.4%; total pay growth slowed to 4.1% (from 4.3%). Real regular pay rose 0.5% on CPIH — a second straight improvement, but still well short of the 2.6% recorded in June 2024.
The public–private pay-growth gap widened for a third consecutive period, from 1.7 points in January–March to 2.1 points in February–April, 2.6 points in March–May and 3.3 points now. Public sector regular pay accelerated to 6.1% (from 5.5%) and total pay to 6.2%, both inflated by NHS pay awards landing earlier in 2026 than in 2025. Private sector regular pay growth fell to 2.8% — matching the weakest reading since the 2.4% recorded in August–October 2020.
Outside the public sector, wholesaling, retailing, hotels and restaurants led private pay growth at 3.5%; construction was in outright decline (−0.1%) on the year. AWE stood at £755 total pay and £703 regular pay a week in June.

The Public–Private Pay-Growth Gap

Regular pay annual growth, 3-month average — public vs private sector
Period	Private (%)	Public (%)	Gap (pp)
Jun 2025	4.8	5.7	0.9
Sep 2025	4.2	6.6	2.4
Nov 2025 (recent peak)	3.6	7.9	4.3
Mar 2026 (Jan–Mar)	3.1	4.8	1.7
Apr 2026 (Feb–Apr)	3.0	5.1	2.1
May 2026 (Mar–May)	2.9	5.5	2.6
Jun 2026 (Apr–Jun)	2.8	6.1	3.3

This is the second time in under a year the pay-growth gap has widened sharply: it spiked to a 4.3-point recent peak last November, narrowed to a 1.7-point trough in January–March, and has now widened for three consecutive periods to reach 3.3 points. The pattern recurring rather than resolving is the point.

Note: ONS carried out its annual seasonal-adjustment review this month, reopening the entire AWE back series to revision. Treat comparisons with previously published AWE figures with the usual caution.

Why This Matters

This is not a tightening labour market pushing wages up broadly — unemployment is higher than a year ago and vacancies are at an 11-year low outside the pandemic. It is the state outbidding a private sector that is losing pricing power on labour entirely. Public sector regular pay at 6.1% sits against a private sector reading of 2.8% — matching the weakest since the depths of the 2020 pandemic labour market. A pay-growth gap this wide, reopening for the second time in under a year, is politically striking even allowing for the pay-award timing effects. What it shows beyond dispute is that public sector pay growth is again running on a very different track from private sector earnings.

The real pay improvement — 0.5% on CPIH — is genuine but modest, and it is happening while the jobs market itself cools: vacancies falling, payrolls shrinking, unemployment a touch higher than twelve months ago. That combination points to slack building in the private labour market even as headline pay figures look reasonably firm.

What This Means for the Economy

For the MPC, the signals point the same way: unemployment edging up on the year, vacancies at an 11-year low outside Covid, and private sector regular pay at 2.8% — the weakest print in nearly six years. That is exactly the labour-cost disinflation the Committee needs to see, and it strengthens the case for further cuts on the schedule this desk has set out. Public sector pay running at more than double the private rate is a fiscal signal, not a monetary one, and the Bank should not let NHS award-timing noise cloud that distinction. For the Treasury, the arithmetic is unforgiving: public sector average pay growth is running at more than twice the private-sector rate, funded by an economy where payrolled employment is falling, vacancies are drying up and private-sector pay growth has slowed to a near six-year low. The state's own pay settlement is moving further out of step with the economy that has to fund it.

Next release · ONS Labour Market Overview & Average Weekly Earnings — 15 September 2026