The number of people employed in the UK has met the same record high as November last year, though there’s no real evidence of an increase in wages. With rises in interest rates, this puts the Bank of England in a pretty sticky situation.
The data comes from The Office of National Statistics, which reported that employment rose 102,000 to 32.2 million, setting the employment rate at 75.3%. This is the joint highest rate since records began back in the 1970s.
Unemployment also fell, only slightly, setting the 16+ joblessness rate to 4.3%, which is the lowest since 1975.
At the same time, the amount of job vacancies has hit a record high of 810,000 in the run up to December, demonstrating a strong demand for recruits.
Good news after two successive job reports showed that employment had decline in recent times.
So record numbers of people are in employment and more firms are hiring than ever before, yet wages are stagnating. The ONS report shows that average total wages are up by 2.3% year on year, which sounds good, but when you consider that this is below the rate of inflation, it actually represents a decline in pay.
Diving deeper, analysts have pointed to a small rise in the quarter’s annual rate of pay growth (excluding bonuses), from 2.3% to 2.4%.
The Interest Rate Problem
Aside from diminishing take-home pay for UK employees, this data demonstrates the problem that the Bank of England’s interest-rate setters are facing. Classically the BoE would see rising employment as an indication of economic growth, but the slack in wage growth obscures this picture.
Ben Brettel, an economist at Hargreaves Lansdown explained, “there seems to be a … fundamental shift in the labour market, with new technology and global competition both weakening workers’ bargaining power.
“It looks like low wages now explain low unemployment, rather than low unemployment acting as a catalyst for better pay.”
The BoE raised interest rates in November last year for the first time in 10 years, trying to avoid inflationary pressure on the economy. However, financial markets are expecting a couple of further increases by 2020.
Starting Salary Increase
Although average wage growth is stagnating, starting salaries are increasing according to a recent survey.
Conducted by the Recruitment and Employment Confederation, 400 recruitment agencies revealed that both permanent and temporary workers, especially nurses and other medical employees, were being offered higher starting rates of pay.
Candidate availability fell dramatically towards the end of last year, and with the employment rate at an all-time-high, employers are having to offer more to attract talent.
Kevin Green, REC’s chief executive, said: “Nursing and medical staff remain the most in demand for temporary roles – further evidence of the strain the NHS is feeling on filling vacancies.
“Recruiters are reporting a vast number of job areas that employers are finding hard to fill including, welders, van drivers and, for the first time, baristas.
“Employers as a response to these candidate shortages are offering increased starting salaries to attract staff but while this has been the case for some time it isn’t translating into significant wage growth across the economy yet.
“Early in the New Year, people often think about changing jobs, so employers are going to have to think carefully about how they can both retain existing capabilities and find the new hires they need as competition for people intensifies.
“Bosses should consider going to wider talent pools and to be inventive about how to improve their employer brand and make themselves an even more attractive place to work.”
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