UK economic resilience causing green shoots to emerge in labour market 20 October 2026 The UK’s relatively strong economic performance this year may finally be starting to feed through into the labour market, with payrolled employment and private sector wage strengthening over the summer, the Resolution Foundation said today (Tuesday). Over the past two years, the UK has experienced a weakening labour market. Levels of payrolled employment fell by 194,000 between October 2024 and July 2026. Wage growth has also weakened in the private sector, with pay packets shrinking in real terms between October 2025 and June 2026. But the latest data suggests that green shoots may be emerging. Payrolled employment increased by 13,000 between July and September, while the (admittedly unreliable) unemployment rate also fell. Rates of pay growth are also starting to pick up in cash terms. Looking at short-term (annualised three-month) changes in private sector pay between March-May and June-August, nominal wage growth increased to 4.3 per cent. Overall, real wages have grown by £1.98 over the past year. However, the level of real wages peaked two months ago, and with inflation rising and forecast to hit 4 per cent in the new year, further falls in real wages are likely. The Foundation adds that falling vacancy levels – down 21,000 over the past quarter – suggests any green shoots are tentative, with further positive signs needed in the coming months. Louise Murphy, Senior Economist at the Resolution Foundation, said: “The labour market has performed poorly in recent years as the number of jobs has fallen and pay growth weakened. But the UK’s recent bout of economic resilience may finally be creating some green shoots, with employment levels finally rising and private sector wage growth stabilising. “Overall though, real wages have grown by a princely £1.98 over the past year – enough to fund around two minutes’ worth of sweets for trick or treaters next week. “These tentative signs of recovery will be sorely tested in the coming months however as inflation approaches four per cent, putting pressure on real wages. The Chancellor will also hope too that his Budget helps rather than hinders this mini jobs recovery.”
