Scottish Economic Bulletin - August 2026

Labour Market

Labour market conditions have loosened over the past year with vacancies falling, however pay growth remains resilient.

Employment, Unemployment, and Inactivity

• The Labour Force Survey (LFS) shows Scotland’s unemployment rate remained relatively low in the 3‑months to May at 4.7% (UK: 4.9%), albeit had risen by 0.5 percentage points (p.p) over the quarter and 1.3 p.p over the year, and is at its highest rate in 2 years.
• Alongside this, the employment rate rose 0.3 p.p over the quarter to 74.3%, although is 0.7 p.p lower compared to last year, while the inactivity rate fell 0.8 p.p over the quarter to 21.8% and is 0.6 p.p lower on an annual basis.^[18]

• The fall in employment over the past year is also reflected in Pay as you Earn (PAYE) Real Time Information data which shows that the number of payrolled employees (2.45 million) was broadly unchanged in June (down 800), however has fallen 0.1% (c. 2,100) over the year.^[19]
• Furthermore, the increase in unemployment is also reflected in Scotland’s Claimant Count unemployment rate (3.7%), which remains low relative to the UK as a whole (4.4%), and was broadly stable in June. However the number of claimants of unemployment related benefits rose 4.3% (4,500) over the year to 108,400, and is at its highest level since November 2024.^[20]

Recruitment Activity

• The increase in unemployment and fall in employment over the past year is also reflected in softer recruitment activity. ONS Textkernel data indicates that recruitment activity compared to last year has fallen with the number of online vacancies in June 13.8% lower than in June last year.^[21]
• Similarly, the PMI business survey for Scotland indicates that private sector staffing remained broadly unchanged in June (50.1), however follows a pattern of generally falling staffing levels over the past 18 months (50 = stable employment levels).^[22]

• Looking ahead, BICS data indicates a higher share of businesses expect employee numbers to increase (16.2%) than to decrease (8.2%). However, most businesses continue to expect employee numbers to remain unchanged (66.8%), with the share increasing since the start of the year and indicating some stabilisation in recruitment against a backdrop of elevated uncertainty in the economic outlook.

Earnings

• In response to the labour market loosening over the past year and lower levels of inflation, the pace of earnings growth had slowed notably towards the end of 2025 and into the new year, however there has been a renewed pick-up in growth in recent months. ^[23]

• Nominal median monthly PAYE pay in Scotland (£2,672) grew by 4.7% on an annual basis in June, down marginally from 5.3% in May. In real terms, adjusting for annual inflation of 2.6%, real earnings grew by 2.1%, above the 1.7% average growth rate of the prior six months.