Analysis
By Gavin Mochan
Although some indicators have suggested a slowdown in economic activity, concerns about UK labour shortages aren’t going away any time soon. The jobs market has proven remarkably resilient, with the number of available candidates below that of available jobs for only the second time in history.
Scotland recorded the lowest growth in jobs of all the UK nations in June, but at a reading of 53.4 remains well above the 50.0 mark that divides contraction from expansion. There are now 37,000 more payrolled employees than in February 2020, the month before the pandemic started.
Weekly online job ads are 34 per cent higher than in February 2020, but they are lower compared to the same period a year ago following an incredible bounce in 2021 as we emerged from lockdown. Across the UK, the accommodation and food sector has posted a 163,000 increase in employees during the past 12 months, though at the other end of the spectrum the construction sector has suffered a fall of 7,000.
Worker shortages continued in June across all industries, impacting 38% of all companies. Problems are particularly acute in sectors such as accommodation and food services (44%), construction (43%), and arts and entertainment (43%).
Of those firms struggling to recruit 56% say there are a lack of qualified applicants in the market and – potentially related – 17% said it was because of a reduction in EU applicants, rising to 35% for those operating in accommodation and food services.
With inflation sitting at 9.1% and heading higher, firms are also struggling to keep up with salary expectations. More than a quarter – 27% – say they are hampered by the fact that they can’t offer an attractive pay package to potential employees.
The lack of qualified candidates looks set to grow even more acute in sectors hoping to boost employee numbers. For example, 53% of firms in Scotland’s information and communications sector are looking to hire in the immediate future, as are 41% of those in the professional and scientific fields. More will have to be done to upskill existing staff, and to better facilitate the arrival of qualified workers from EU and non-EU countries.
Salaries are increasing but not at the same rate as inflation, equating to a real-terms pay cut for many. Real mean earnings declined by 2.8% between March and May, the largest fall since 2001. Using a different measure of inflation preferred by the Bank of England, the drop in real pay is even more severe at 3.7%.
This is fuelling the demand for wage increases which in turn has given rise to increasing industrial action. At the same time, low numbers of job applicants are creating high-profile disruptions in sectors such as the aviation industry.
With inflation expected to top 11% and no end in sight to supply shocks, it is no wonder that consumer sentiment is at a 16-month low in Scotland. Unless one of the shocks currently contributing to rising prices abates, consumers will have no choice but to curtail spending thereby further weakening economic growth.
Gavin Mochan is the managing director of s1jobs.
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