Dr Sangwoo Lee responds to latest UK labour market figures

Dr Sangwoo Lee, Assistant Professor at the Institute for Employment Research, University of Warwick, said: "The June 2026 release depicts a labour market stuck in structural cooling. The unemployment rate eased slightly to 4.9% on the quarter but remains up 0.3 percentage points annually. Rather than signalling genuine stabilisation, the concurrent 0.3 percentage point tick-up in economic inactivity to 21.0% suggests that the minor headline reduction in unemployment is partly driven by discouraged jobseekers retreating from the market rather than being successfully absorbed into stable jobs.

The defining structural feature remains the acute divergence between contracting administrative payrolls and resilient household survey employment. Payrolled employees fell by 31,000 this quarter and 103,000 over the year. This persistent decline is consistent with a gradual shift away from traditional payroll employment towards a broader range of non-traditional working arrangements, many of which offer weaker job security and fewer income protections. Demand-side retrenchment is reinforced by vacancies falling by 2.6% to 707,000, their lowest level since early 2021, leaving the unemployed-to-vacancy ratio trapped at an elevated 2.5. While this softer demand has eased immediate pressures, long-term unemployment still remains high at 24.8% of the total share.

"Looking ahead, although softer wage growth reduces domestic inflationary pressure, the Bank of England is likely to remain cautious given persistent inflation risks, particularly from energy and household costs. Even if monetary policy becomes less restrictive later this year, lower interest rates alone will do little to reverse the ongoing weakening of payroll employment and broader labour market fragmentation. Strengthening baseline protections for non-traditional workers remains the primary economic imperative."

18 June 2026