UK wages grow rapidly as firms scramble for staff after Covid lockdown

The number of job vacancies surged by 290,000, or 44%, to 953,000 from May to July. File photo

UK wage growth hit a record as companies posted more than a million new job vacancies for the first time in an unprecedented scramble for staff following the loosening of lockdown rules.

Average earnings in the three months through June surged a record 8.8% from a year earlier, the UK's Office for National Statistics said. While the figure partly reflects distortions created by the pandemic, underlying wage pressures are also gathering pace.

The pick-up underscores the scale of the recovery from the deepest economic slump in 300 years.

Although the Bank of England expects strains in the labour market to prove temporary, policy makers warned this month that meeting the 2% inflation target will require a modest withdrawal of monetary stimulus.

“These shortages are a long-term issue that pre-dates the pandemic,” said Neil Carberry, chief executive of the Recruitment and Employment Confederation. 

“Businesses need to realise that they are not simply going to fade away,” he said.

The figures are a fillip for UK Chancellor of the Exchequer Rishi Sunak, who is seeking to scale back the pandemic hit to the public finances by moving people from the jobless and furlough rolls back into work.

Pay growth has been skewed higher by depressed wages a year earlier and compositional effects, caused by job cuts falling disproportionately hard among the low paid. 

Excluding those factors, the ONS reckons that earnings growth is running at between 4.9% and 6.3%. For pay excluding bonuses, the figure is estimated at 3.5% to 4.9%. 

The headline rate of unemployment fell to 4.7% in the second quarter, the lowest since the summer of 2020 after the first pandemic lockdown. 

That figure is set to rise when wage subsidies for furloughed workers end on September 30. 

The number of job vacancies surged by 290,000, or 44%, to 953,000 from May to July. 

“Vacancies are a forward-looking indicator due to lead times in recruitment, so we can be confident that employment will continue to increase over the coming months,” said Jonathan Boys, labour market economist for the CIPD, a group representing human resources staff. 

Bloomberg