U.K. Companies Hire at Record Pace as Economy Reopens
U.K. companies added payrolls at a record pace in June as the reopening of the economy triggered an unprecedented scramble for staff.
The number of employees on company books climbed by 356,000, the Office for National Statistics said Thursday. Demand for staff rose, with vacancies in June alone increasing to a record 962,000, up 7% from May.
“The rise in vacancies confirms the ongoing struggle to hire staff,” said Suren Thiru, head of economics at the British Chambers of Commerce. “The recruitment difficulties faced by firms go well beyond temporary bottlenecks. Staff shortages may drag on any recovery.”
The figures come a day after Bank of England Deputy Governor Dave Ramsden highlighted the unexpected buoyancy of the labor market and signaled that officials may soon have to consider whether to withdraw emergency stimulus to keep inflationary pressures in check.
Wages including bonuses rose an annual 7.3% in the three months through May, the fastest on record. Statisticians cautioned that the figures are being distorted by the pandemic.
The increase reflected depressed wages a year earlier, the loss of low-paid jobs and the return to full-time work of staff who were previously furloughed on just 80% of their pre-pandemic salary. The ONS estimates underlying pay growth is running at 3.9% to 5.1%, and at between 3.2% and 4.4% when bonus payments are excluded.
”Do we think that is going to lead to sustained wage pressures? At the moment the answer would be ‘no,’” said Sanjay Raja, senior economist at Deutsche Bank. “I think we’ll see a string of very strong near-term wage growth, but we do think that will subside as we move into 2022. By the end of the next year, official wage data should come back down to reality. I don’t think we should lose sight of the fact that there’s still plenty of slack in the labor market.”
For the Bank of England, the key question is what happens when wage subsidies for furloughed workers end on Sept. 30. While the number of people receiving the benefit has fallen sharply -- new ONS estimates Thursday put the figure as low as 1.1 million -- many of them are likely to find themselves out of work come the autumn. Economists expect the jobless rate to reach 5.2% by the end of the year.
Another risk facing the economy is that removing most of the remaining restrictions on July 19 may trigger a spike in coronavirus infections, making consumers more cautious about going out and spending.
The number of vacancies increased to 862,000 in the second quarter, above the pre-pandemic level for the first time. Demand for staff increased across most sectors of the economy last month.
Chancellor of the Exchequer Rishi Sunak hailed the latest labor market data as evidence that the economy is “bouncing back.”
British retailers contacted by Bloomberg say although there are clear issues with recruiting warehouse workers and delivery truck drivers currently, the much bigger challenge is staff, or sometimes whole teams, being forced to self-isolate when contacted by the National Health Service track and trace system.
The impact “will only get worse right across the economy, as cases are already rising fast and the final restrictions are eased,” said Helen Dickinson, chief executive of the British Retail Consortium.
Mike Cherry, national chairman of the Federation of Small Businesses, said labor recruitment issues in the fields of agriculture, tourism and hospitality mean many small firms are struggling to reopen fully despite being able to do so for the first time in more than a year.
The total number of people in work rose by 25,000 in the three month through May, much lower than the pace of previous periods. Inactivity -- those neither in work nor looking for job -- rose by 71,000. That resulted in a 68,000 drop in the unemployment level.
The jobless rate, which has been held down by the government’s furlough program, rose to 4.8% in the three months through May -- only marginally above where it was before the pandemic struck
©2021 Bloomberg L.P.