The British Pound (GBP) retreated slightly against the US Dollar (USD) on Friday, with GBP/USD trading around 1.3555, down 0.1% on the day, following a modest correction after Thursday’s rebound.
The Pound remains under pressure amid persistent concerns over the health of the UK labour market ahead of next Tuesday’s release of key employment statistics. Forex investors are watching closely, as the Bank of England (BoE) could adjust its rate-cutting stance depending on labour market developments. Volatility in GBP/USD may increase if employment data indicate a sharper-than-expected slowdown in the UK economy.
A gradually cooling labour market
The UK employment picture has shifted noticeably since spring. According to the Office for National Statistics (ONS), the number of employees on payroll fell by 164,000 year-on-year and by 8,000 between June and July 2025, reaching 30.3 million. This marks the tenth decline in the past 12 months, primarily affecting the hotel, catering, and retail sectors.
The unemployment rate for April-June stood at 4.7%, up from 4.6% in the previous quarter. However, Resolution Foundation research suggests the rate could quickly rise to 5%, its highest level since 2021. As Gregory Thwaites, the think tank’s Director of Research, notes, “the easing of the labour market is taking the form of a hiring freeze rather than a wave of layoffs, which remains bad news for jobseekers.”
Falling job vacancies, youth employment at risk
Job vacancies declined by 5.8% in the May-July quarter to 718,000, the lowest level since April 2021, marking the 37th consecutive quarterly drop. Recruitment weakness is linked to rising labour costs, including the increase in the National Living Wage (from £11.44 to £12.21), higher employer national insurance contributions (from 13.5% to 15%), and a reduced tax threshold.
Stephen Evans, CEO of the Learning and Work Institute, adds, “The job market continues to cool, with significant losses in retail and hospitality. This reflects a fragile economy combined with higher labour costs.” British youth are particularly vulnerable, with unemployment among 16-24 year-olds at 14.1% and 1.22 million young people neither in employment nor in training (NEET). Helen Gray, Chief Economist, warns, “Long-term unemployment among young people is rising and could have lasting effects on their career prospects.”
Wage growth remains high but under pressure
Despite the slowdown in hiring, wage growth remains solid. ONS data show a 5.0% annual rise in wages excluding bonuses between April and June. Private sector growth lags at 4.8% compared with 5.7% in the public sector. Real wage growth stands at 0.9%, offering some leeway for the BoE to cut rates. Monica George Michail, Associate Economist at the National Institute of Economic and Social Research, notes, “The decline in job vacancies is likely to slow wage growth in the future,” which could ease the BoE’s trade-off between sluggish growth and inflation above its 2% target (4.1% in June).
Technical analysis: GBP/USD still below solid resistance
GBP/USD rebounded after testing a short-term trendline at 1.3525, confirming Thursday’s bullish breakout from a flag pattern. However, the Cable faces resistance around 1.3590, a level that has capped bullish attempts since July. A decisive break above this level is needed to support further upside. On the downside, a drop below 1.3525 could trigger a pullback toward the 100 Simple Moving Average (SMA) on the 4-hour chart, currently at 1.3490.
