Wage Rises Slow To Two-and-a-Half Year Low: Jobs Survey

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A survey of the jobs market has revealed wage increases have slowed to the lowest level in two-and-a-half years amidst a sharp rise in job seekers entering the labour market, providing further evidence that the Bank of England won't need to raise interest rates again.

The RICS/KPMG Report on Jobs Survey reveals a 'loosening' in the UK jobs market as the permanent staff salaries index fell to 57.4 in October from 57.6 in September. It averaged 60.0 in the second half of the 2010s and 71.8 in 2022.

"Growth in starting salaries, while still strong, has slowed to a 31-month low, good news if you are worried about a wage-price spiral" Julian Jessop at the IEA.

The Bank of England kept interest rates unchanged in September and November and said it would only raise rates again if data pointed to unexpected strength in the economy and labour market. The latest Jobs Survey findings suggest the Bank won't need to hike again as trends point to wage increases continuing to fall.

The Survey also revealed the availability of candidates improved for the eighth straight month in October and at a much sharper rate than in September, confirming an improved supply of workers that will maintain downward momentum in wages.

Economists had feared earlier in 2023 that the UK's elevated wage pressures would ensure inflation remains at elevated levels for an extended period, requiring more interest rate hikes from the Bank of England.

"The recent accumulation of labour market slack and the sharp decline in CPI inflation suggests that pay increases for most employees will be considerably smaller in 2024 than in 2023. Accordingly, we expect year-over-year growth in average weekly wages to slow to about 4.2% in 2024, from 7.1% in 2023, enabling the MPC to cut Bank Rate to 4.50% by the end of next year," says Samuel Tombs, Chief UK Economist at Pantheon Macroeconomics.