Introduction: UK starting salaries rise at slowest pace in nearly 3 years
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK salary growth is cooling as cautious employers cut back on their hiring plans.
Starting salaries paid to new staff rose at the slowest pace in 32 months in November, the latest poll of recruitment firms from KPMG and REC has shown.
Although there was still competition for candidates with sought after skills, recruitment firms reported that clients were under greater budgetary pressures.
This led to the slowest rise in permanent starters’ pay since March 2021, with starting salary inflation easing in all four monitored English regions, except the Midlands.
REC and KPMG also report that pay for temporary workers rose at the lowest rate in 33 months. Temporary wages actually fell in the North of England, but rose at the fastest pace in London.
That implies the UK labour market is weakening, a blow to workers, but it should cheer the Bank of England as it assesses whether interest rates are restrictive enough to bring down inflation to its 2% target.
Claire Warnes, a partner at KPMG, explains:
“Businesses want to plan for the year ahead, but the prospect of faltering UK economic growth means the certainty they need isn’t there. This is now impacting starting salaries.
Even temp staff billings – which have given much needed flexibility to employers in key sectors such as health & care and IT – are facing some contraction. And with the Bank of England looking like it will be keeping interest rates high for now, businesses will need to stay resilient to manage this period of flux.”
The report also found that hiring slowed again in November, while the number of vacancies dropped for only the second time since February 2021.
This led to the largest rise in available candidates for almost three years. Here’s the full story:
Also coming up today
The US jobs market will also be focus as investors await the final non-farm payroll report of the year. November’s NFP is expected to show a pick-up in hiring, after a lull earlier in the autumn.
US payrolls are expected to have risen by 180,000 jobs, ahead of the 150,000 increase in October.
But wage growth could slow, with average earnings growth tipped to slow to 4% from 4.1%.
The NFP will be closely watched in the markets, as a gauge as to whether America’s central bank has lifted interest rates high enough to cool US inflation and pull off a ‘soft landing’.
The agenda
Key events
Oil on track for 7th weekly fall in a row
In the energy market, the oil price is on track to post its seventh weekly fall in a row, despite a pick-up today.
Yesterday, Brent crude fell below $74 per barrel to the lowest since the end of June, pulled down by concerns that the global economy is weakening.
But it’s gained around 2% this morning, back to $75.50 per barrel, after Saudi Arabia and Russia urged other Opec+ members to join their agreement to cut output.
At the end of November, several Opec+ countries announced additional voluntary cuts to production, but that did not prevent oil continuing to drop in December.
Housebuilder flags subdued demand as reservations fall
UK housebuilder Berkeley Group has flagged that conditions in the UK property market remain subdued.
Reservations for private sales at Berkeley in the first half its financial year are running around one third lower than the levels secured throughout the 2022/23 financial year, it told shareholders this morning.
Berkeley blames the “sharp increase in interest rates from September last year”, following the mini-budget, and the ongoing elevated political and macro volatility.
It says the market should pick up, once it is clear that interest rates are heading lower:
During the last six months, macro volatility has increased, domestically and abroad, with the prospect of UK interest rates remaining higher for longer and weak economic growth projections.
Against this backdrop, the sales market lacks urgency and Berkeley’s net reservations for the six months to 31 October 2023 have been around a third lower than the average rate throughout FY23. We anticipate the sales market will remain subdued before inflecting in its normal cyclical manner once there is greater confidence in a downward trajectory for interest rates and economic stability returns.
Berkeley also reported a 4.6% rise in pretax profits for the six months to 31 October, to £298m.
But it build fewer houses – delivering 1,785 homes delivered, plus 204 in joint ventures, down from 2022’s 2,080 homes, plus 251 JVs.
There is a great deal of variability in hiring activity across UK regions and sectors, reports Neil Carberry, REC chief executive.
Carberry explains:
The Midlands and the North both saw strong performances for temporary and permanent roles, in sharp contrast with London and the South, with permanent hiring in London especially slow.
The ongoing stronger performance of the private sector on new vacancies is also a notable positive signal.
Carberry also warns that if there is a pick-up in hiring, it will add to the strains on the jobs market due to embedded labour shortages, adding:
…this week’s pro-election rather than pro-economy decision on immigration will exacerbate that.
Any return to growth could drive domestically-generated inflation unless we adopt a proper plan for workforce capacity, embracing better welfare-to-work support, finally reforming the Apprenticeship Levy, funding Further Education properly and the kind of support for school leavers suggested by today’s Broken Ladders report from EDSK and REED on the school-to-work transition.”
Introduction: UK starting salaries rise at slowest pace in nearly 3 years
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK salary growth is cooling as cautious employers cut back on their hiring plans.
Starting salaries paid to new staff rose at the slowest pace in 32 months in November, the latest poll of recruitment firms from KPMG and REC has shown.
Although there was still competition for candidates with sought after skills, recruitment firms reported that clients were under greater budgetary pressures.
This led to the slowest rise in permanent starters’ pay since March 2021, with starting salary inflation easing in all four monitored English regions, except the Midlands.
REC and KPMG also report that pay for temporary workers rose at the lowest rate in 33 months. Temporary wages actually fell in the North of England, but rose at the fastest pace in London.
That implies the UK labour market is weakening, a blow to workers, but it should cheer the Bank of England as it assesses whether interest rates are restrictive enough to bring down inflation to its 2% target.
Claire Warnes, a partner at KPMG, explains:
“Businesses want to plan for the year ahead, but the prospect of faltering UK economic growth means the certainty they need isn’t there. This is now impacting starting salaries.
Even temp staff billings – which have given much needed flexibility to employers in key sectors such as health & care and IT – are facing some contraction. And with the Bank of England looking like it will be keeping interest rates high for now, businesses will need to stay resilient to manage this period of flux.”
The report also found that hiring slowed again in November, while the number of vacancies dropped for only the second time since February 2021.
This led to the largest rise in available candidates for almost three years. Here’s the full story:
Also coming up today
The US jobs market will also be focus as investors await the final non-farm payroll report of the year. November’s NFP is expected to show a pick-up in hiring, after a lull earlier in the autumn.
US payrolls are expected to have risen by 180,000 jobs, ahead of the 150,000 increase in October.
But wage growth could slow, with average earnings growth tipped to slow to 4% from 4.1%.
The NFP will be closely watched in the markets, as a gauge as to whether America’s central bank has lifted interest rates high enough to cool US inflation and pull off a ‘soft landing’.
