Real wages grew for the first time since the recession in August, as year-on-year advertised salary growth outpaced the rate of inflation, according to the latest UK Job Market Report from Adzuna.co.uk
Average advertised salaries rose to £34,463 in August, up 1.9% from £33,873 in August 2013, compared to a CPI inflation rate of 1.5% over the same period. In real terms, advertised salaries climbed £149 over the last twelve months – the first growth in real terms since the financial crisis.
At the same time, the UK’s job creation continued to soar, with advertised vacancies rising 30% year-on-year from 698,862 in August 2013 to 905,297 in August 2014. Based on current growth forecasts, there are now projected to be over 1 million vacancies available by the end of 2014, according to Adzuna data.
The ratio of jobseekers to vacancies declined from 1.99 in August 2013 to 1.06 in August 2014. On a monthly basis, the ratio fell 0.8 percentage points from 1.14. If this rate continues into September, next month may see more vacancies than jobseekers for the first since the recession.
Andrew Hunter, co-founder of Adzuna, explains: “Exceptional growth in advertised vacancies again this month highlights extreme positivity in the jobs market, as employers turn away from the traditional August slowdown in favour of continued expansion. Looking at pay rates, it seems the cart has at last caught up with the horse as the UK experiences real wage growth for the first time since the financial crisis. Much of the UK’s economic good news has arrived on the back of high levels of job creation, but this has often been at the expense of low wages. However, as companies enjoy more profit, salary growth is finally starting to outpace inflation. A real wage rise marks a significant turning point in the road to economic recovery. This time next year, phrases like ‘the cost of living crisis’ may fade into a distant memory.
“News of real wage growth will further fuel interest rate speculation. With the Bank of England stressing it is waiting for a pick-up in wages, this significant news could push forward the notion of an interest rate rise before 2015. As real wages look set to continue growing over the coming months, expect the calls for an interest rate rise to get louder.”
Wage growth spreading across the nation
For the first time since the recession, advertised salaries rose year-on-year in every region of the UK in August. This included London, which witnessed its first annual wage growth in a year, with advertised salaries rising 0.6% from £42,086 in August 2013 to £42,321 in August 2014.
While the capital has been slow to catch up, the salary gap between the highest and lowest paid regions has closed considerably over the past year. The gap between London, the highest paid region, and Northern Ireland, the lowest paid, has shrunk by £1,718 since August 2013. London’s sluggish wage growth has allowed other regions to close the UK pay divide.
Skills shortage fuelling salary hike in production sectors
Manufacturing and Trade & Construction were the sectors with the highest salary growth over the past twelve months, with wages rising 11.6% and 9.2% year-on-year in August respectively. Advertised salary growth in Manufacturing outpaced the rate of inflation by 10%; a sign that non-service based industries are benefiting the most from national wage growth.
For areas such as Construction, this wage growth fits the growing evidence showing that a skills shortage is taking effect. Demand for construction and manufacturing projects has boomed in recent years, after the financial crisis hit output significantly. Both employment and wages continue to blossom for these industries, with recent research showing that the number of bricklayers claiming job seekers allowance has fallen from 15,000 to 1,750 in just five years. A substantial increase in employment figures has been mirrored by wages as bricklayers and other building workers see a large wage increase as companies compete for their work.
However, with Customer Service and IT Jobs also among the top sectors for wage growth, there are signs that the wider economy is benefiting too.
Commenting on the performance of sectors, Andrew Hunter explains: “The resurgence of manufacturing and construction industry wages is a true sign that country’s economic growth is well and truly back on track. If we take construction as a bellwether industry for the British economy, than these figures are certainly impressive.”
“There could be further wage growth for the Customer Service industry over the next few years, with both George Osborne and Ed Milband announcing rises to the minimum wage.
“However, the good news must come with a note of caution. Behind these impressive salary figures is an economy desperately in need of more skilled workers. If we aren’t careful, we could see a skills shortage begin to cause real pain for economic growth. This needs to be addressed from the ground up, by encouraging more of our youth to study relevant qualifications, and providing more opportunities to learn on the job through apprenticeships and internships. That would also lend a helping hand to our young workforce – many of whom are still struggling to secure their first job.”