UK—July Labour Market and August Inflation Preview

Economics Research 13 September 2026 | 11:40PM BST

UK—July Labour Market and August Inflation Preview

BOTTOM LINE: We expect next week’s (15 September) labour market figures to James Moberly | show the unemployment rate rising by a tenth to 5.0%. The payrolls figures for July Goldman Sachs International are likely to be revised up slightly, but we expect the August flash print to show a further 5k decrease in employment. Private sector regular pay growth is likely to be unchanged at 2.8%, with the sequential pace softening slightly after a firmer month-on-month figure for June. Inflation data for August (released 16 September) will likely show headline inflation rising to 3.1%, three tenths above the BoE’s estimate. Energy inflation is set to increase notably further on the back of higher road and liquid fuel prices, while food inflation is also likely to tick up slightly. We expect core inflation to remain at 2.6%, with a slight firming of core goods and rising airfares offsetting a decline in underlying services inflation.

July Labour Market n We expect next week’s labour market figures (released 15 September) to show the three-month unemployment rate increasing to 5.0% (from 4.9%). While some leading indicators including the redundancies data have shown an improvement in recent months, surveys including the KPMG/REC still point to some increase in slack. The pattern in the single month figures also slightly raises the chances of an increase at this print, albeit this has been a less reliable guide in recent months given stronger cohort effects. Risks to our forecast are tilted to the downside.

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Exhibit 1: Unemployment Rate Likely to Edge Up to 5.0%

Source: Goldman Sachs Global Investment Research, Haver Analytics

n Our forecast implies that the vacancies-to-unemployment ratio will edge down to 0.39 (from 0.40) in the three-months to July. We expect the vacancies figures for August to show a slight decrease in the three-month average, even allowing for a partial reversal of the weakness in single-month figures for small businesses in July. n The payrolls figures for July are likely to be revised up slightly to show a 5k contraction, whereas the flash estimate showed a 13k decrease. We expect the August flash print to show payrolls falling by a further 5k. Our tracking models suggest that underlying employment growth has improved somewhat in recent months but remains soft. There has been no clear bias in the August initial estimates since the change in the imputation methodology in 2022.

Exhibit 2: Underlying Employment Growth Has Improved but Remains Fairly Soft; No Clear Bias in August Flash Print

Source: Goldman Sachs Global Investment Research, Haver Analytics, Bank of England, ONS

n Turning to wage growth, we expect private sector regular pay growth to remain unchanged at 2.8% in July, with the sequential pace likely to moderate slightly after a