UK jobs market slows in sign inflation pressures are easing

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The UK jobs market slowed and growth in starting salaries slipped to a three-year low in January, according to a closely watched survey that could bolster the Bank of England’s confidence that inflationary pressures are easing.

The monthly report, published on Thursday by KPMG and the Recruitment & Employment Confederation, showed hiring activity was slower than usual for January, with an index of permanent placements falling to 43.4 from 45.6 the previous month and vacancies falling.

Recruiters responding to the survey said that for the 11th month running there were more candidates available to fill vacant posts, with many of them linking this to redundancies, as well as slower hiring.

Meanwhile recruiters said starting salaries for permanent joiners were still rising, but the pace of growth was now the softest seen in 34 months, and was below the historical average.  

“Pay growth has normalised, inflation is dropping and the hiring market has been cooling for a year now,” said Neil Carberry, the REC’s chief executive, who argued “it’s high time that the Bank of England starts releasing the brake pedal on our economy”.

The BoE’s monetary policy committee has made it clear it wants to see more evidence that wage growth is slowing before it can declare that “the job is done” and start to cut interest rates from their current 16 year high of 5.25 per cent.

Sarah Breeden, a BoE deputy governor, said on Wednesday that “for services inflation to fall to levels consistent with [the BoE’s 2 per cent inflation] target, some combination of a further moderation in labour cost growth and firms’ margins will be needed”.

Monitoring wage growth and how firms passed labour costs into prices over the new few months would be “vital”, she added, as most employers would conclude annual wage setting processes by April.

The KPMG/REC survey has…