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Record pay rises as vacancies down again

There are predictions that pay growth will slow down as labour shortages ease

Pay was up 7.8%, excluding bonuses, in June to August 2023, while vacancies fell for the 15th consecutive period.

Public-sector pay excluding bonuses was up 6.8%, the highest regular annual growth rate since comparable records began in 2001. 

Excluding bonuses, private-sector pay growth was 8%, among the largest annual growth rates seen outside of the pandemic period.

Neil Carberry, chief executive of recruiter body, the Recruitment and Employment Confederation, said: “The main driver of higher pay is now 2023 pay settlements, which are still in the annual date. These were high as firms reacted to the shortages of 2022 by paying existing staff more to retain them and cushion against inflation.”

When adjusted for inflation, pay rose by 1.1%, or 1.3% including bonuses.

Carberry added that the April increase in the minimum wage from £9.50 to £10.42 has also driven the figures up.

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Meanwhile, the number of vacancies in July to September 2023 was 988,000, a decrease of 43,000 from April to June 2023. 

Jack Kennedy, senior economist at the jobs website, Indeed, said as labour shortages ease, pay growth will slow down.

He said: “Vacancies are down 24% from their peak. That continued rebalancing of the labour market should take some of the heat off wage growth in coming months.”

Vacancies have fallen in 14 of the 18 industry sectors. However, they remained 187,000 above their pre-pandemic January to March 2020 levels.  

Carberry said the drop in hiring could reverse soon.

He said: “Permanent hiring has been dropping in the UK for most of the year, reflecting employers’ concerns about inflation and the performance of the broader UK economy. 

“Even so, vacancies remain above their pre-pandemic level. Businesses tell us that they feel quite confident and are ready to invest as the economic picture improves, which provides some hope of a turnaround in hiring in the next few months.”