In May, the average starting pay for jobs in the UK increased by 6.5% compared to the same month last year, marking the fastest growth in four months.
This rise occurred despite a 20% annual decrease in the number of job advertisements, according to figures from the hiring platform Indeed, contributing to the complex outlook on inflation.
The 6.5% increase in advertised starting pay outpaced the 6.0% rise in official wage data for the three months leading up to April. Although this was the smallest increase since September 2022, it was still double the rate that the Bank of England considers consistent with low inflation.
The Bank of England remains hesitant to reduce interest rates from their current 16-year high due to uncertainty about whether pay growth is genuinely slowing, even though headline inflation recently returned to its 2% target.
Despite rising wages, the economic mood has not significantly improved, partly due to the lingering effects of past double-digit inflation. This situation poses a challenge for Prime Minister Rishi Sunak ahead of next week's election.
Economists are concerned that the large number of people who have left the UK job market since the COVID-19 pandemic may create long-term inflation issues.
Indeed's data indicated that the number of unfilled jobs, which can signal future wage and inflation pressures, is 0.9% below its pre-pandemic level, having decreased by 20% over the past year.
"The UK labour market has continued its adjustment in recent months, though it remains somewhat tight and still competitive for employers in many sectors," said Jack Kennedy, senior economist at Indeed.
The most significant pay increases occurred in traditionally low-paid sectors such as childcare, cleaning, security work, retail, and hospitality. Workers in these areas benefited from an almost 10% rise in the minimum wage in April.
Indeed noted that the pandemic and post-Brexit changes to immigration policy have exacerbated hiring difficulties for low-paid roles.
The most severe labour shortages, based on the duration jobs were advertised, were in veterinary, engineering, aviation, and software roles. Photo by Diliff, Wikimedia commons.