New hire wages rise fastest in nearly two years as signs of tight labour market mount

new hire wages

Wages for new hires grew at the fastest pace in almost two years in August, as declining candidate availability added to the picture of a tight labour market, according to a new survey published today.

The rate of pay inflation for new permanent placements grew at the fastest rate since October 2015 last month, the figures from the Recruitment and Employment Confederation (REC) and IHS Markit reveal.

Almost a quarter of recruitment agencies surveyed said average salaries were higher, while a mere 2.1 per cent of salary offers fell, City AM reports.

The report also found that staff availability has continued to fall, at a time when staff vacancies have risen at a “steep” pace and demand for staff grew at the fastest pace since April 2015, the report said.

The figures provide further evidence of a tightening labour market, which will offer some relief to economists at the Bank of England.

The Bank has remained adamant that inflationary wage pressure will rise in the coming year, despite meagre growth at a time when unemployment is at a four-decade low.

The rate of unemployment hit 4.4 per cent in June of this year, the lowest rate since 1975, according to the Office for National Statistics. At the same time, however, wage growth across the economy as a whole has remained weak, at an annual rate of only 2.1 per cent in the year to June.

Kevin Green, REC chief executive, said: “While the working population in general has experienced a pay squeeze, there are clearly opportunities now to earn more by moving jobs.”

The rise in demand for new hires has been driven by increasing demand for professional and managerial staff, according to Green, but the lack of people looking for non-office roles has also added to the shortage of talent.

This shortage, at a time of record employment, has been exacerbated by recent falls in net immigration from the EU, he added.

Green said: “In many areas of the jobs market candidate supply cannot meet demand. Employers are having to offer more money to secure the people with the skills they need.

“It is essential that the government recognises this by developing an evidence-based immigration system that will support the economy.”