UK—June Labour Market and July Inflation Preview

Economics Research 14 August 2026 | 3:12PM BST

UK—June Labour Market and July Inflation Preview

BOTTOM LINE: Next week’s (August 18) labour market figures are likely to show the James Moberly | unemployment rate dropping by a tenth to 4.8% on technical factors, in line with the Goldman Sachs International BoE’s estimate. We expect a further deceleration in private sector regular pay growth to 2.8% (from 2.9%) as sequential wage pressure remains moderate, also matching the Bank’s forecast. The July inflation data (released August 19) are likely to show headline inflation rising to 2.9% (from 2.6%), a tenth above the Bank’s projection. The increase is likely to be driven by higher energy inflation on the back of rising electricity and gas bills, while core inflation should be unchanged at 2.6% as a decrease in services inflation on base effects is offset by a firmer core goods print.

June Labour Market n We expect next week’s labour market data to show the three-month unemployment rate dropping to 4.8% in June (from 4.9%), in line with the BoE’s estimate. While we still think that the labour market is loosening, this print is likely to see a decrease as the high single-month figure for March drops out of the three-month average. Although there is some read-across from the March numbers to the June data given an 80% overlap in the sample, our previous analysis suggests that these cohort effects only partially persist.

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Exhibit 1: Technical Factors Point to a Slight Drop in the Unemployment Rate

Source: Goldman Sachs Global Investment Research, Haver Analytics

n Our unemployment rate forecast implies that the vacancies-to-unemployment ratio will edge up to 0.41 (from 0.40). We expect vacancies figures for July to show little change given the pattern in the single month figures and the latest Indeed Job Postings data. n Our models point to limited revisions to the June payrolls data compared with the initial estimate of -4k. We expect the July flash figures to show payrolls unchanged. Some indicators of employment growth have shown improvement recently, including the KPMG/REC survey. Nonetheless, our underlying employment tracking remains weak. One upside risk to our estimate is that the July flash figures have sometimes overstated payrolls growth and subsequently been revised down in the last several years, but this has not been a consistent pattern.

Exhibit 2: We Expect July Flash Payrolls to be Unchanged with Some Upside Risk

Source: Goldman Sachs Global Investment Research, Haver Analytics, ONS

n Turning to wage growth, we expect the average weekly earnings data to show private