LONDON (Reuters Breakingviews) — Britain's labour market is doing pretty well. Unemployment has fallen in the past year and wages are rising at a decent clip. But judging by data released on Aug. 12 by the Office for National Statistics, one problem could be brewing: A shortage of skills.
The number of job vacancies is stubbornly high, especially in some sectors that require more technical proficiency. There were 735,000 vacancies in the three months to July, close to the record high of 744,000 seen earlier this year. Some of the biggest quarterly increases in vacancies were seen in manufacturing and in professional, scientific and technical activities.
This meshes with a recent survey of recruitment agencies. Businesses hired staff at the slowest rate in more than two years in July as a shortage of qualified candidates started to bite, the Recruitment and Employment Confederation said on Aug. 7. Longstanding problems in filling jobs in technology and engineering were starting to be replicated in construction, it said.
It's hardly unusual that qualified candidates are scarcer after a period of economic growth. This shortage could further spur wage growth, which could necessitate a quicker hike in policy rates unless productivity growth recovers. The latest figures show average weekly earnings excluding bonuses rose 2.8 per cent in the three months to June, matching the six-year high hit in the three months to May.
Granted, optimists say that a shortage of qualified candidates could force companies to become more productive. And events beyond Britain's shores may make Bank of England Governor Mark Carney more inclined to worry about inflation undershooting than overshooting - which would encourage members of the Bank of England's Monetary Policy Committee to keep delaying rate hikes. Commodity prices are falling and declines in Asian currencies, led by China, could depress the sterling price of goods imported from the region.
But an acceleration in overall pay growth may mask the fact that unskilled workers are sharing less and less in economic prosperity. This is a problem for the government, not the central bank.
- Total pay, including bonuses, rose 2.4 per cent in the three months to June compared with the same period a year earlier, the Office for National Statistics said on Aug. 12. This marked a slowdown from the 3.2 per cent growth rate reported for the three months to May. The ONS said the drop reflected a high single-month growth rate for March 2015 falling out of the latest figures.
- Regular pay, which excludes bonuses, rose 2.8 per cent in the three months to June - the same as the growth rate for the three months to May.
- British starting salaries for permanent jobs rose at the weakest pace in 18 months in July and firms hired staff at the slowest rate in over two years, according to a survey of recruitment agencies published on Aug. 7.
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