The labour market is changing – and not obviously for the better

This was first published on our Substack.

The latest labour market release by the ONS (18 June 2026) was a mixed bag. The headline numbers tell a story of a weak labour market, and where the nature of work is quietly shifting.

For those thinking the glass might be half full, there were tantalising signs that unemployment might (might…) have peaked. Two months ago in April, the single month unemployment rate fell sharply to 4.6%, just above the lowest rate since June 2025. At the height of the war in the Middle East, it looked surprisingly as though the labour market might be taking a turn for the better. But last month it bumped back up to 5.4%, suggesting the drop had been just a blip. Then, this morning’s estimate came back down to April’s rate of 4.6%. The moral of the story is to take any new Labour Force Survey (LFS) rates with a pinch of salt. The smoother three-month unemployment rate measure does a better job of filtering out the noise, and on that basis the message is clear: unemployment has drifted upwards over the past four years, placing us at much higher rates than where we were in 2022.

Additionally, the jobs being created are increasingly those that offer workers the least security and voice. Some might argue that the LFS is unreliable, but it is harder to argue away the payrolled employee count, which, while prone to revision, consistently shows big cliff-edge falls in employee jobs. We thought last month’s big fall of 53,000 payrolled jobs would be revised down – it wasn’t. And while this month’s flash estimate of payrolled jobs held steady, a total loss of payrolled jobs of 63,000 between February and April is substantial. A flash estimate for May suggests some levelling off, (but again, these are prone to revision, and the direction of travel over recent months is unambiguous).

That said, payrolled jobs don’t capture the whole, broader picture of work in Britain, and the parts that are missing are telling. Between June 2024 and March 2025, 106,000 self-employed jobs were created. After a small drop between March and December 2025, the latest data suggests that this rising trend might carry on longer. Zero-hours contracts tell a similar story. While overall employment has grown by just 1.2% between February 2025 and February 2026, the share of zero-hours contract jobs has risen by 5.6% – more than four times faster.

This matters because irregular work is not just a different quantity of employment – it is a different quality of work. This month, we published Take it or leave it, which found that just 14% of the lowest paid workers feel they have influence over decisions affecting their work, down from 23% in 2001. In surveying workers in hospitality, cleaning and warehousing, we showed that against a long-term decline in collective bargaining, individual power matters more. But workers in low-paid and precarious sectors feel they have little to no influence over the decisions that affect them, and zero-hours contract workers were among those feeling especially disempowered. Today’s data shows that position is getting weaker, not stronger – a labour market that creates insecure, irregular work is one in which the balance of power tilts towards employers.

Private sector pay continues to be weak

To wrap it up, pay is just about holding on – for now. Real earnings growth came in at 0.1% in the three months to April: barely positive, and the result of nominal pay growth of around 2.9% being almost entirely eaten by inflation.

But this big picture conceals a very importance nuance: a stark divide between the public and private sectors. Private sector real wages have now been falling since October 2025, while public sector workers enjoyed real growth over the past year – a gap between the two that has been rarely seen outside a recession.

The UK labour market is weaker than it was a year ago and becoming more insecure too with fewer payrolled jobs and more zero-hours contracts. Private sector workers already seeing their pay packets shrink in real terms. And with inflation set to rise further, it is likely to get worse before it gets better.