The UK jobs market continues to tighten as some employers are forced to cope with a shortage of skilled workers. This in turn pushes up wages in certain sectors, but the overall pay picture remains highly unbalanced across the main segments of the economy.
The jobless rate in the UK rose for first time in more than two years in May as the number of people within the jobseekers' allowance scheme also increased for the first time in two years.
In the quarter to June, economists expect the headline jobless rate to have remained unchanged at 5.6%. The jobless claims change, a narrower and less distant gauge tracking labour market activity, is expected to have increased by a further 1,000 people in July, compared to a rise of 7,000 people a month before. The underlying wage growth, measured by average weekly earnings excluding bonuses, is estimated to have increased 2.8% in the quarter to June, which would be unchanged from the previous three months. The Office for National Statistics (ONS) is releasing fresh figures on Wednesday.
A sharp and sudden increase in jobless claimants in June suggests the UK jobs market continued to tighten markedly, given the fact the number of people in the jobseekers' allowance scheme was falling on a monthly basis between November 2013 and May 2015 by an average of 27,300.
According to the latest survey by the CIPD, the professional body for HR and people development, "the tightening labour market is undoubtedly encouraging more employers to turn to a wider range of younger recruits."
The survey also showed "the proportion of employers that say they plan to hire more apprentices and school-leavers has increased sharply in response to recruitment difficulties since spring 2014." The feedback also revealed that around 50% of employers said recruitment difficulties stemmed from a serious shortage of skilled workers, while 30% of employers plan to fill these gaps by hiring more apprentices.
Similarly, the Recruitment and Employment Confederation (REC) and KPMG 'Report on Jobs' showed the number of potential workers available for jobs fell the most since November 2014, while overall vacancy levels increased at the slowest pace in two years in July. Even though rising, the rate of pay increases moderated to an 18-month low in July from April's recent peak, the survey said.
As far as the overall growth in wages is concerned, the levels remain highly unbalanced across the economy. The latest official figures showed regular pay – stripped of bonuses – picked up by 2.8% in quarter to May, which was the highest level since January 2009. Wages in the private sector rose even faster, by 3.3%, offset by a significantly weak manufacturing or public sector, where pay rose only 1.1% over the same period.
In its August Inflation Report (IR) forecasts, the Bank of England revised wage growth slightly upwards for this year, from 2.5% up to a 3% increase in the fourth-quarter growth rate in Q4, but lowered it for the next year from 4% down to 3.75%. It said "wage growth is expected to continue to strengthen in the near term, reflecting the past narrowing in labour market slack and the pickup in productivity growth..." The UK government's introduction of a National Living Wage set at £7.20 an hour as of April 2016 is expected to boost average annual wage growth by less than 0.1 percentage points over the Monetary Policy Committee’s forecast period, the IR forecast showed.
Despite picking up pace recently, wages still remain well below their pre-crisis levels. While earnings increased on average by 4% before the crisis, between 2001 and 2008, the same measure of pay rose just 1.6% on average between January 2009 and May 2015.
For now, record-low inflation, in combination with rising wages, offers higher real income to households, who in turn can feel less pressure on their budgets, after years of above-target inflation and low wages.
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