Pay rises are outpacing prices in these key industries, research reveals

Pay rises are continuing to outpace inflation and boost household spending however there has been a sharp fall in advertised vacancies.

Advertised pay on the Indeed jobs search site rose by 6.5 percent in the year to May, with lower paid roles in sectors like childcare, retail and hospitality seeing the strongest gains at more than 8 percent.

A major factor was a 9.8 percent jump in the minimum wage in April, but it also reflects worker shortages since the pandemic.

However, on the negative side of the UK's economic register there was a 20 percent fall in advertised vacancies compared to this time next year.

The mixed messages create a dilemma for the Bank of England's Monetary Policy Committee (MPC) which is under pressure to cut the base rate from the current 16 year higher of 5.25 percent.

High pay rises create a risk that inflation could take off again later in the year, which is something the Bank is tasked with preventing. However, lower job vacancies point to a slowing economy which could create the space for rate cuts.

Jack Kennedy, senior economist at Indeed UK, said: "Despite the fact that hiring demand has cooled significantly, there remains some residual tightness in the labour market.

“That’s particularly true at the lower-paid end. It’s something that’s going to complicate things for the MPC.”

Indeed said the number of vacancies posted on its sites have slipped below pre-Covid levels for the first time. And recent data from the Office for National Statistic show the UK’s official unemployment rate reached a two-year high in the three months to April.

At the same time about a quarter of the UK’s working age population is inactive, the highest level since 2015, while the number of long-term sick reached a new record of 2.83 million in April.

Mr Kennedy warned this is disproportionately impacting lower-paid sectors, which find it harder to fill vacancies.

Indeed figures also show the appetite from foreigners for UK jobs is up by 40 percent compared to pre-Covid levels. About 5 percent of searches for UK postings came from overseas candidates in May, driven by demand for high-skill roles in technology, engineering, healthcare and finance.

Still, businesses are finding it hard to fill these jobs with foreign applicants due to the government’s tougher migration rules, which include raising the salary needed to get a work visa by 50 percent..

Looking ahead, Me Kennedy said: "We are approaching the point where the Bank of England will potentially start cutting interest rates; we might also see a bit more business confidence post-election in terms of an end of the ‘wait and see’ attitude that some employers might be having.

“That could support hiring demand and that could feed through continued wage pressures.”