UK hiring stays strong, wage growth sharpest since 2007 -survey

By Shadi Bushra

LONDON (Reuters) – Hiring in Britain grew strongly last month and salaries rose at the fastest pace in six years, a survey showed, the latest sign of strength in the economy that raises questions about the Bank of England‘s suggested timing of an interest rate hike.

The survey by the Recruitment and Employment Confederation (REC) and consultancy KPMG showed that the permanent hiring index eased slightly to 61.9 in October from 62.2 in September, but remained well above the 50 mark that indicates growth.

Job vacancies and starting salaries for permanent staff rose at the fastest rate since before the financial crisis, indicating strong demand for qualified candidates across all monitored job categories and in both the public and private sectors.

Although the REC/KPMG survey focuses on jobs placed through recruitment agencies, and therefore is not fully representative of hiring in Britain, other data suggests similar trends.

Figures from the Office of National Statistics showed job vacancies up 12.5 percent in the three months to September.

Britain’s economy has staged a surprisingly strong recovery this year, driven mostly by consumer spending and a strong service sector.

But purchasing manager surveys this week showed the recovery is beginning to gather steam in the construction and manufacturing sectors as well.

The REC/KPMG survey also suggested a broadening of the recovery, with engineering and construction workers being the most sought after hires in October.

REC Chief Executive Kevin Greene cautioned that while rising salaries are good news for Britain’s workers, a long-term skills shortage still exists in the labour market.

“The skills shortage shows no signs of abating and although it is starting to drive wages up there is a real danger that it could cause serious damage to future economic growth in the UK,” Greene said.

Economists have also noted that because of inflationary pressures real wages have actually been falling for the past decade and are likely to continue to fall through 2014.

But any fresh data pointing to a strengthening labour market could affect the Bank of England’s calculations about when unemployment could hit the 7 percent threshold. The bank has said it would not consider raising interest rates from record lows until the jobless rate falls to that level.

The Bank’s current expectation is the threshold will be met in late 2016, but economists expect it to bring that date forward slightly when it publishes new forecasts next week.

(Editing by Susan Fenton)

UK hiring stays strong, wage growth sharpest since 2007 -survey