With consumer sentiment taking a hit and a record decline in pay, a slump in employment would seem to be expected. That’s not the case, however. Demand for workers continues to flourish, continuing the paradox that is the Scottish labour market.
Most recently, unemployment in Scotland remained at 3.2 percent during the three months to June 2022, with the employment rate decreasing slightly, and the rate of economic activity rising marginally.
s1jobs data shows that the number of vacancies advertised online across Scotland stood at 45,000 in July, the same as in June. According to the Office for National Statistics there were almost 1.3 million jobs advertised across the UK, 53% more than the average in 2019.
These near-record levels of vacancies don’t accurately portray the underlying reality for businesses and employees though. When adjusted for inflation, growth in regular pay fell from April to June by 3% compared to the same period a year earlier, the steepest decline since records began.
In relation to average total pay growth, the private sector is doing better than the public sector. The latter had growth of 1.8% in total pay compared to 5.9% in the private sector.
Although sectors with acute labour shortages, eg. retail and hospitality, had the largest growth rate at 7.7%, it’s easy to see the ongoing staffing issues with these industries when visiting a restaurant or hotel.
This percentage increase is also coming from a low base as many in these sectors are on living or minimum wage.
The most worrying factor in all this is, of course, that inflation is speeding up, not slowing down.
Consumer price inflation, known as CPIH, hit 8.2% in June. That figure stood at just 0.7% when we went into the pandemic in March 2020. The recent increase in inflation is what is pushing real pay growth rates into decline in actuality.
Unsurprisingly, consumer sentiment has taken a nosedive in the second quarter of the year. This indicator is at its lowest point since the lockdown in the first quarter of 2021.
Furthermore, the Bank of England has said it expects the UK’s labour market to start cooling off from the middle of next year, with the current unemployment rate of 3.8% predicted to reach 6.3% in three years’ time.
The outlook for hiring demand is looking far less robust than such numbers suggest.
