Market Analysis

Average starting pay for British jobs increased in May at the fastest rate in four months, despite a 20% annual decline in job vacancies, according to figures from hiring platform Indeed. This adds complexity to the inflation outlook.

The 6.5% rise in advertised starting pay year-over-year outpaced the 6.0% increase in official wage data for the three months to April. This official rise was the smallest since September 2022 but still double the rate the Bank of England associates with low inflation.

Uncertainty about the significant slowing of pay growth remains a crucial factor in the BoE's hesitation to lower interest rates from their current 16-year high, even after headline inflation returned to the 2% target last month.

However, the legacy of double-digit inflation means rising wages have not yet led to an economic feel-good factor, which negatively impacts Prime Minister Rishi Sunak's prospects in next week's election.

Some economists express concern that the significant number of people who have left Britain's job market since the COVID-19 pandemic could lead to long-term inflation issues.

Indeed's data also revealed that the number of unfilled jobs, an indicator of future wage and inflation pressures, is 0.9% below its level just before the COVID-19 outbreak, following a 20% decline over the past year.

"The UK labour market has continued to adjust in recent months, though it remains somewhat tight and still competitive for employers in many sectors," said Jack Kennedy, senior economist at Indeed.

The largest pay increases occurred in typically low-paid sectors such as childcare, cleaning, security work, retail, and hospitality, where many workers benefited from an almost 10% rise in the minimum wage in April.

The pandemic and post-Brexit changes to immigration policy have also exacerbated hiring difficulties for low-paid roles, Indeed noted.

The most significant labour shortages, based on the duration jobs were advertised, were in veterinary, engineering, aviation, and software roles.

Paraphrasing text from "Reuters" all rights reserved by the original author.