British workers demanded higher wages in the three months to the end of June as employers struggled to fill job vacancies, data showed on Tuesday.
Figures from the Office for National Statistics (ONS) revealed that the UK labour market remained out of balance in the three months to the end of July, with an estimated 953,000 unfilled positions – the highest number of job vacancies ever recorded by the ONS.
The figure was up from 290,000 in the three months to the end of June and 168,000 more than pre-pandemic levels.
Average weekly pay up
The shortage in the availability of workers helped push up average weekly pay, calculated over the three months to the end of June, by 8.8%. This percentage rise excluded bonuses and is an increase of 1.4% from the March–May period.
ONS deputy national statistician Jonathan Athow said base and compositional effects meant the results had to be treated with caution, but recent surveys have added to the evidence that companies are having to pay more for suitable labour.
Earlier this month, KPMG and the Recruitment and Employment Federation reported a record rise in starting salaries as candidate availability fell sharply due to an unprecedented rise in job vacancies.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, underlined the base and compositional effects argument, however, saying wage growth remained artificially boosted by the concentration of job losses over the last year at the low end of the pay range.
“We see little risk of the upcoming burst of CPI inflation translating into a period of strong wage growth next year,” Tombs said.
He added: “Accordingly, we continue to think that the labour market will lose its current momentum, enabling the BoE’s monetary policy committee to wait until the first half of 2023 to raise the base rate.”
Unemployment slightly falls
Ruth Gregory at Capital Economics was a little less dovish. While sticking to the view that the central bank won’t raise rates before mid-2023, she added: “Today’s figures, suggest that the risks are tilted towards wage growth coming in a bit higher and the MPC raising rates a bit sooner than we anticipate.”
Tuesday’s ONS data showed that the rate of unemployment in the UK fell in the three months to the end of June to 4.7% from 4.8% between April–June. The economic inactivity rate fell by 0.2 percentage points to 21.1%.
For those workers still on furlough, Tombs at Pantheon said many employers are likely to either make these staff redundant once the scheme ends or force them to accept fewer hours.
“Our base case remains that the unemployment rate will rise to 5.2% in the second quarter, though uncertainty remains high about the extent to which business will retain staff that are currently surplus to requirements,” he concluded.