U.K. Job Demand Rises to 16-Year High as BOE Divides on Rates

U.K. demand for workers rose at the fastest pace in 16 years last month, boosting pay growth and supporting the view among a Bank of England minority that it’s time to raise interest rates.

A job-vacancy index increased to 68.2, the highest since 1998, from 68 in July, the Recruitment & Employment Confederation and KPMG said in a report in London today. Average starting salaries for permanent workers rose at a “strong” pace, they said.

The BOE’s nine-member policy committee divided in August, with Ian McCafferty and Martin Weale voting to increase the benchmark interest rate from a record low. They said a continued rapid fall in U.K. unemployment meant it was more likely that wage growth would pick up.

“Employers still cannot find staff with the right skill set,” said Bernard Brown, head of business services at KPMG. “Their desperation to fill recruitment holes is leading to continued wage growth, which is creating a market that is both unsustainable and unrealistic.”

The BOE kept its key interest rate unchanged at 0.5 percent yesterday, where it’s been since March 2009. Minutes of the meeting will be published on Sept. 17.

In August, a majority of policy makers said a rate increase wasn’t justified and there was “merit in waiting to see firmer evidence that solid increases in pay growth were in prospect.”

The index for permanent job vacancies rose to 68.2 in August from 68.1 in July, today’s report showed. The gauge for temporary staff jumped to 68.7 from 66.8. A reading above 50 indicates an increase versus the previous month.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE