Neil DennisThe number of job vacancies in the UK hit one million for the first time since records began in 1971. The figures for the June-August period come as the furlough scheme is set to end later this month.
Data published by the Office for National Statistics (ONS) on Tuesday showed situations vacant in the June-August period jumped 35.2% to 1,034,000 from the May-July three-month period – 249,000 above the pre-pandemic level in January-March 2020.
All industry sectors contributed to the growth in vacancies, with many increasing their job postings to record levels. The largest increase was seen in accommodation and food services, which recorded a 75.4% rise with 57,600 new available roles.
The unemployment rate in the latest measured period – May-July – fell to 4.6% from 4.9% in the three months between April-June. The employment rate rose to 75.2% in the latest period from 74.7%.
Wage inflation
While the ONS conceded that its data on pay growth was skewed by temporary factors from base effects measuring against weak year-ago comparatives, these effects are beginning to fade from the data. Nevertheless, average earnings continued to increase at a higher-than-expected pace.
Pay including bonuses rose at 8.3% in the three months to July, down slightly from the 8.8% rate set in the previous three months, while pay excluding bonuses rose at 6.8%, down from 7.4%.
“The latest data brought more signs that labour market slack is declining fast and that labour shortages are contributing to faster underlying pay growth,” said Ruth Gregory, senior UK economist at Capital Economics.
“The surge in job vacancies, which took them 27.5% above their pre-crisis level, suggests that labour shortages are still intensifying. This will put further upward pressure on wages,” she added.
Furlough scheme ending
However, with the government furlough scheme due to be wound down at the end of this month, the outlook remains uncertain. Some analysts expect the ending of the scheme to have a major impact as firms decline to take back surplus staff and as furloughed workers close to retirement refuse to return to work.
“Job creation remained strong over the summer, but the winding down of the furlough scheme at the end of this month will result in the reversal of the third quarter’s progress,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
Monetary policy implications
The jobs data add a further piece to what is becoming a confusing puzzle for the Bank of England’s Monetary Policy Committee (MPC). A tightening labour market and above-target inflation ought to cause some concerns for the MPC, but recent surveys, such as Purchasing Managers’ Index data, suggest economic activity is being hampered by materials and staff shortages.
“We think that next year inflationary pressures will subside and that interest rates won’t be raised until mid-2023,” said Gregory at Capital Economics.
Tombs at Pantheon added: “Underlying wage growth probably won’t be strong enough later this year, when labour market slack has increased again, for the MPC to be convinced that they must raise Bank Rate in the first half of 2022.”
Nevertheless, investors appeared to expect some yield support as they backed sterling. The pound climbed 0.2% to $1.3865 against the dollar and was up 0.1% to £0.8524 against the euro in early morning.
