Scottish economic insights: September 2026

Labour market conditions

Employment and unemployment

Over the last six months, Scottish labour market has softened. The Labour Force Survey (LFS) shows that Scotland’s unemployment rate stood at 5.1% in the three months to June. This is an increase of 0.6 percentage points (p.p.) over the quarter and 1.4 p.p. over the year. While the Claimant Count unemployment rate has remained broadly unchanged over the last six months, the number of claimants has increased over the year. In July the Claimant count unemployment rate was 3.6%, and it reflected an increase of around 4,500 claimants from last year.

At the same time, economic inactivity had increased marginally at the start of the year but has since fallen over the quarter to 22.0% (-0.7 p.p.) in the three months to June. This also reflects a 0.1 p.p. fall on an annual basis.

Alongside this, the headline employment rate rose moderately by 0.2 p.p. over the quarter but fell by 1.1 p.p. over the year. The fall in employment over the year is also reflected in Pay as you Earn (PAYE) Real Time Information data, which shows that the number of payrolled employees has continued on a moderate downward trend since the start of the year. The number of payrolled employees has fallen over the year by 0.2% (c. 5,500) to 2.44 million, its lowest since February 2023.

Recruitment activity

The loosening labour market over the year is also reflected in softer recruitment activity. ONS Textkernel data indicates that recruitment activity fell compared to last year, with the number of new online job adverts posted in Scotland falling by 9.7% in July when compared to the same time last year.^[22] However, the RBS Growth Tracker business survey shows that job creation in the private sector increased over the last three months, with the rate in August easing marginally from July, during when the Employment Index recorded its highest rate since September 2024.

Looking ahead, BICS data indicates that a higher share of businesses expect employee numbers to decrease (11.4%) in the coming month than expect numbers to increase (9.3%). Most businesses, nonetheless, continue to expect numbers to remain unchanged (67.8%), with the share increasing since the start of the year indicating stabilisation amid a backdrop of increased uncertainty in the economic outlook.

Earnings

As the labour market has loosened, earnings growth in Scotland has slowed compared to last year. While annual median earnings growth picked up temporarily in April and May latest figures show that nominal median earnings growth eased to 4.3% in the year to July, down from June 4.9%. When adjusted for inflation, real terms annual median earnings eased from 2.3% to 1.5% over the same period, reflecting both easing in nominal earnings growth and the pick up in inflation.

At a GB level, nominal earnings growth over the last six months has remained robust in the public sector, with earnings growth in the private sector slowing over the past year. Earnings growth in the public sector, which had historically been slower than growth in the private sector, surpassed private sector earnings growth in April 2025, although the ONS note that it is affected by the timing of public sector pay awards. In June, 3-monthly earnings growth in the private sector eased to 2.8%, its lowest rate since October 2020. This compares to 3-monthly earnings growth of 6.1% in the public sector, its highest rate since December 2025.^[23]

Over this year, earnings growth is expected to be slower than in 2025, with latest agents’ survey from the Bank of England suggesting that pay settlements for 2026 will average 3.6% compared with 4% in 2025.^[24]