London’s labour market has softened more than the rest of the country’s, according to the Office for National Statistics (ONS). This article sets out what the September 2026 figures show for the capital, what they say about hiring and pay, and how to read them with appropriate caution.
What do the latest figures say about London?
The ONS published its latest labour market release on 15 September 2026, covering May to July 2026. For London, the regional bulletin reported an employment rate of 73.9% for people aged 16 to 64, an unemployment rate of 6.8% for those aged 16 and over, and an economic inactivity rate of 20.5% for those aged 16 to 64.
The bulletin states that the highest unemployment rate of any region was in London. The next highest were the West Midlands at 5.6% and Yorkshire and The Humber at 5.2%. The lowest was Northern Ireland at 2.4%.
London’s figures also moved in the wrong direction over the year. Employment was down 1.4 percentage points on May to July 2025, unemployment was up 0.7 percentage points, and inactivity was up 0.9 percentage points.
How London compares with the rest of the UK
The table below sets the capital against the UK average for the same period, as reported by the ONS (seasonally adjusted).
| Measure (May to July 2026) | London | UK | Gap |
|---|---|---|---|
| Employment rate (16 to 64) | 73.9% | 75.1% | 1.2 percentage points lower |
| Unemployment rate (16+) | 6.8% | 4.9% | 1.9 percentage points higher |
| Inactivity rate (16 to 64) | 20.5% | 20.9% | 0.4 percentage points lower |
The gap arithmetic is straightforward: 75.1 minus 73.9 is 1.2; 6.8 minus 4.9 is 1.9; 20.9 minus 20.5 is 0.4.
The mix is worth noticing. London’s inactivity rate is slightly below the UK’s, which means the capital is not simply a place where more people have stepped away from work. More of its residents are looking for jobs and not finding them, which is what a higher unemployment rate captures.
Why has the capital’s position shifted?
The ONS figures describe what is happening, not why. The statistical office does not attribute London’s weaker readings to any single cause, and it would be unwise for anyone else to do so with confidence.
What can be said is that the capital’s labour market is unusually concentrated in the kinds of professional and corporate roles that have featured in recent discussion of hiring caution. Readers who want the longer-run context can see how work is changing for London’s professional workforce, including the effect of hybrid working on where and how roles are structured. The pattern is also consistent with the ONS’s own note, in its national overview, that smaller firms may not be recruiting because of rising labour costs.
Is hiring slowing nationally too?
Yes. The ONS reported an early estimate of 702,000 vacancies across the UK in June to August 2026, down 8,000, or 1.1%, compared with March to May 2026. That is a modest quarterly move, and a shallow decline can still leave a labour market with comparatively few openings for those looking.
Payrolled employees, measured through HMRC records, tell a similar story. The ONS reported 30.2 million in August 2026 on a provisional basis, down 145,000, or 0.5%, on the year. Over the year to July 2026, the fall was 101,000, or 0.3%. The August figure is an early flash estimate and is likely to be revised, so it is best treated as a direction of travel rather than a precise count.
Nationally, the unemployment rate was 4.9% in May to July 2026, up 0.2 percentage points on the year but largely unchanged on the quarter. In other words, the national picture is one of drift rather than collapse, with London showing the sharper version of it.
What is happening to pay?
Pay growth is still positive, but its pace is easing and it is unevenly spread. The ONS reported regular pay growth, excluding bonuses, of 3.5% in May to July 2026. Total pay growth, including bonuses, was 3.9%, down from 4.2% in the previous three-month period.
The split between sectors is striking:
- Public sector regular pay growth: 6.3%
- Private sector regular pay growth: 2.9%
- Gap between the two: 3.4 percentage points (6.3 minus 2.9)
Adjusted for inflation using CPIH, the ONS put real regular pay growth at 0.6% and real total pay growth at 0.9% for the same period. Real gains remain, then, but they are thin, and a London worker in the private sector is likely to be nearer the lower end of that spread than the headline averages suggest. These are UK-wide figures, and no London-specific pay claim is made here.
What does a slower market mean for people already in work?
For employed professionals, a market with fewer vacancies changes the calculation about moving. When openings are plentiful, switching employers is the most reliable route to a pay rise. When they are scarce, the same move carries more risk and offers fewer alternatives if it does not work out.
That does not make a move wrong, but it raises the value of the questions explored in our guide to what employees should consider before changing jobs: the stability of a prospective employer, the realism of its flexibility promises and the quality of the management a candidate would be joining. In a thinner market, due diligence on the employer matters more, because the cost of a poor landing is higher.
Those considering staying put have a different set of questions: whether current responsibilities are expanding, whether internal moves are realistic, and whether skills are keeping pace with what employers want. The latter is covered in our look at the skills London employers are looking for.
What does it mean for employers and small businesses?
A looser market tilts bargaining power towards employers in some roles, but it brings its own pressures. The ONS’s observation that smaller firms may be holding back from recruiting because of labour costs fits with wider evidence of squeezed margins, explored in our piece on the financial pressures London’s small businesses are navigating.
For employers, the practical reading of the data is that a larger pool of applicants does not necessarily mean easier hiring. Sectors with persistent skills gaps will still find it difficult to fill specialist posts, while generalist roles may attract far more applications than a team can sensibly review. Retention also deserves attention: staff who stay because alternatives are scarce are not the same as staff who are engaged.
How to read these numbers without over-reading them
Three cautions apply. First, the unemployment figures come from the Labour Force Survey, and the ONS itself advises caution with short-term changes because estimates for smaller groups, including individual regions, can be volatile. A single quarter’s movement in London should not be treated as a settled trend.
Second, the vacancy figure is an early estimate and the payroll figure is provisional. Both can be revised, sometimes materially.
Third, averages hide the experience of individual sectors, occupations and age groups. The headline ONS figures do not break London vacancies down by industry or show youth unemployment, so those questions remain open here. The next ONS labour market release is scheduled for 20 October 2026, and it will show whether London’s position has moved.
A cooling market rewards careful reading
The latest official data gives London a less comfortable story than the national one: a 6.8% unemployment rate against 4.9% across the UK, falling employment and a national vacancy count of 702,000. Pay is still rising, but unevenly, and the private sector is lagging the public sector by several points.
None of this amounts to a collapse, and the volatility of regional survey data argues for patience before drawing firm conclusions. It does, however, shift the odds for job-seekers and employers alike, and it makes accurate, current information more valuable than general optimism or pessimism.
This article is general information, not financial, legal or career advice. Statistics are revised regularly and are correct as of the ONS release of 15 September 2026.
Sources: Office for National Statistics
