Salaries are Rising and the Bank of England will Have to Respond with a Rate Rise in August

- Bank of England's Michael Saunders warns on need for interest rates

- CV-Library say salaries are on the up, defying typical summer lull

- "Some of the UK’s key industries are thriving right now"

Above: Michael Saunders says the Bank might have to raise interest rates faster than markets are expecting, and data on salaries suggests he might be right. Image © Bank of England.

The latest job market statistics from CV-Library - a leading independent job site - shows advertised salaries for new roles increasing by 1.2% in June as "businesses across the UK were feeling confident last month."

CV-Library report some of the nation’s key industries saw impressive hikes in pay, a finding that will interest the Bank of England's Monetary Policy Committee which meets in August to decide on whether the economy requires an interest rate rise.

Signs of rising pay pressures is one key economic driver that would likely swing the pendulum to an interest rate rise which would in turn be expected to support the Pound.

The CV-Library report, which compared job market data from June 2018, with that of the same period in 2017, revealed that the job market is "thriving right now", with some of the nation’s key sectors offering competitive salaries.

The top industries for a pay increase include:

1. Legal – pay up by 13.1%
2. Catering – pay up by 9.9%
3. Marketing – pay up by 8.3%
4. Sales – pay up by 4.9%
5. Automotive – pay up by 3.9%
6. Recruitment – pay up by 3%
7. IT – pay up by 2.5%
8. Accounting – pay up by 2.3%
9. Engineering – pay up by 1.6%
10. Manufacturing – pay up by 1.2%

“We typically see recruitment slowing down over summer months, but these hikes in pay suggest that businesses are continuing to push hard to attract talented candidates into their roles. What’s more, some of the UK’s key industries are thriving right now, which is great news for both companies and job hunters across the nation,” says Lee Biggins, founder and managing director of CV-Library.

Furthermore, the data found that job vacancies also rose last month, increasing by 5.9% year-on-year.

While this further proves that businesses are ramping up their recruitment efforts this summer, unfortunately application rates weren’t quite keeping pace with employer demand.

The top five industries for job growth in June, include:

1. Hospitality – jobs up by 34.8%
2. Agriculture – jobs up by 25.6%
3. Legal – jobs up by 17.6%
4. IT – jobs up by 15.9%
5. Education – jobs up by 11.3%

“It’s clear from the data that organisations were remaining very active in their recruitment efforts last month. With June marking two years since the Brexit vote, it’s positive to see that businesses are still pulling out all the stops to secure talented new recruits and continue driving the economy forward," says Biggins.

That said, applications were not keeping pace last month, suggesting that job hunters are still feeling uncertain, even two years down the line.

What’s more, our overall happiness tends to increase during the summer months, particularly given the spate of nice weather we’ve been having recently, so it’s not surprising to see that candidate appetite has taken a knock.

“Despite this, companies across the UK need to keep working hard if they hope to see applications picking back up in the coming months,” adds Biggins.

Bank of England Must React says Saunders

Market expectations are currently running at around 60% for an interest rate rise to be delivered by the Bank of England at their August meeting, with Bank of England policy maker Michael Saunders warning yesterday that the Bank may need to raise rates faster than market expectations.

Saunders, who voted for a hike in the past three meetings, said the Bank may need to raise rates faster than market expectations, saying the UK economy is running out of slack.

But what is slack?

Slack is the amount of extra work that can be done by workers and companies before wages are pushed up. The Great Recession meant that many workers saw working hours reduced as companies pared back output; the economic recovery has seen those hours increase once more, and there comes a point when workers will demand more pay in order to compensate for the increased work load.

This is a crucial moment in an economy's evolution as the rising wages in turn lead to higher inflation expectations which in turn force the Bank of England to raise interest rates in an attempt to cool the economy and inflation.

The by-product of higher interest rates is a higher Pound.

In Saunder's opinion the economy is at this key moment; and it appears his views are backed up by reports such as that produced by CV-Library.

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