Labour market loses more steam as vacancies hit a five-year low

The jobs market cooled further in the second quarter. Vacancies fell to 707,000, the lowest count since 2021, and private-sector regular pay growth slowed to 2.8%.

Pay growth at that pace changes the inflation arithmetic. For most of the past three years, wage growth was the number the Bank of England cited when explaining its caution; at 2.8% in the private sector, it is no longer obviously inconsistent with the 2% inflation target.

The vacancy decline is the cleaner signal of slack returning: fewer unfilled posts means less bidding for workers, which is how pay pressure fades without a spike in unemployment.

The tension for the Monetary Policy Committee is that this cooling is arriving just as headline inflation ticks up on energy costs — the labour data argue for cuts, the CPI path argues for patience.