UK labour market strengthens following recent slowdown

UK labour market: British employers increased wages and displayed renewed interest in hiring during December, as indicated by a survey that the Bank of England may interpret as a continued sign of inflationary pressures in the labour market. 

The survey, conducted by the Recruitment and Employment Confederation (REC) and published on Monday, revealed that the decline in permanent worker hiring continued last month, albeit less sharply than in November. Temporary hiring also contracted, but the decrease was less pronounced compared to the previous month.

Neil Carberry, the REC's chief executive, noted that the slowdown in the labor market appears to be easing, citing December as a period when employers typically delay activities until the New Year. He viewed this as a positive sign that the labor market is resilient in the face of the current economic challenges.

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While permanent staff hiring saw a weaker increase in pay in December, it was still higher than in November. 

The Bank of England, which raised its benchmark interest rate to 5.25 per cent in August, has maintained it at that level, stressing the need for elevated borrowing costs to counter inflation pressures.

The central bank is particularly concerned about the rapid growth in pay, which official data reveals rose at an annual rate of just over 7 per cent in the three months ending October. 

The Bank of England is expected to keep interest rates unchanged at its next scheduled meeting on February 1, although investors are anticipating five rate cuts in 2024.

The REC survey also highlighted that vacancies declined for the third time in four months, and the availability of candidates to fill positions increased, albeit at a slower pace than the nearly three-year record expansion observed in November. 

The survey collected responses from approximately 400 recruitment agencies between December 6 and December 18.

(With Reuters Inputs)