Business Maverick: UK job surveys show more private sector hiring and stronger pay

Vacancies for professional jobs in the private sector jumped to almost 37,000 in July, the most since March 2023, according to data from company websites and job boards provided to Bloomberg by recruiter Robert Walters Plc. That’s up by a third from last month, when companies paused recruitment ahead of the July 4 general election. It’s also a 14% annual rise — a rate not seen since the post-Covid rebound in 2022.

Separate data from the Recruitment & Employment Confederation showed starting salaries continued to increase in July despite a decline in hiring. The surveys together suggest some parts of the labor market remain tight, feeding demands for higher pay that the BOE is concerned may lead to a wage-price spiral. It’s one of the issues central bank officials are looking at in assessing whether they can cut interest rates again.

“If this growth trajectory continues, we expect salaries to start to pick up pace after a period of stagnation,” said Daniel Harris, director of Robert Walters London & South East. “A new government now taking the reins encourages greater business and investor confidence. News of interest rates dropping should see this trend continue.”

Robert Walters estimated demand for office jobs will heat up even more in the second half of the year, leading 2024 to outperform 2023 in terms of new vacancies. REC said that overall vacancies continued falling, and some companies are laying off staff or choosing not to renew contracts as they expire. Even so it showed vacancies in the private sector rose, with temporary staff demand at the highest since October.

“Employers are gradually emerging from the woods, gaining optimism for their businesses and the broader economy,” said Kate Shoesmith, deputy chief executive officer of REC. “London is setting the pace with a growth in permanent placements signaling the potential for an economic bounce back elsewhere in the country.”

The BOE is looking carefully at labor market data to determine the strength of inflationary forces lingering in the economy. Last year, it pushed borrowing costs to the highest since the global financial crisis to rein in demand in the economy. But wage growth remains stronger than is comfortable with its 2% inflation target.

BOE chief economist Huw Pill, who was in the minority voting to keep rates on hold at the meeting, warned about structural changes in the UK labor market, where a shortage of workers has pushed up wages. That’s effectively putting a speed limit on the economy’s ability to grow without reviving inflation.

Governor Andrew Bailey and his colleagues will see two more rounds of inflation and jobs data before their next meeting on Sept. 19. Even as inflation dropped back to the target in the past two months, prices in the services sector came in well above the BOE’s forecasts. Unemployment is picking up and pay growth is edging lower, yet wages remain too hot for comfort in some parts of the economy. 

That’s particularly true in finances and business services, the sector with the largest annual pay growth. Wages in the sector have been holding up at just below 7% since the end of last year, more than three times the BOE’s inflation target. 

Legal and accounting and finance are among the sectors with the strongest appetite for talent, according to Robert Walters figures. Companies posted as many tax vacancies between January and July 2024 as in all of 2023, while legal sector jobs increased 28% in July compared with the same period last year.

Demand for consultants, lawyers and accountants tends to act as a bellwether for the economy. The economic rebound in the aftermath of the pandemic pushed up professional services hiring as companies across sectors were looking for advice on how to grow. That turned into a hiring freeze when businesses postponed big investments in the face of higher interest rates and cost inflation. 

The UK economy is rebounding stronger than anticipated from last year’s mild recession. The BOE upgraded its growth forecast for this year to 1.25% from 0.5%, and warned against the threat of inflation picking up again.

“With forecasts for economic growth improving and potential further interest rate cuts over the coming months there are green shoots of economic recovery,” said Jon Holt, chief executive officer and senior partner at KPMG in the UK.