News (15 Jun) that a record 197,000 people had joined the workforce in May, as the re-opening of non-essential retail and other venues sparked a rush to hire, didn’t contribute to any immediate ratcheting up of inflation or rate hike fears.

The increase marks the sixth consecutive month of job creation, taking the number of payrolled employees to 28.5 million although that figure is still some 550,000 short of the level seen before the pandemic.

In most industries, vacancies are above pre-pandemic levels while companies are having to pay more to hire and retain staff. For the three months to April average pay excluding bonuses rose by 5.6%, the fastest rate since 2007.

However, commentators called the rise ‘transitory’ and pointed to the number of people still not back at work as evidence that there was still slack in the economy.

‘All the dials in the labour market are pointing in the right direction, but they’re distorted by the furlough scheme, lockdown lifting bottlenecks and the effect of annual comparisons now lapping the first wave of the crisis’, said Laith Khalaf, financial analyst at AJ Bell.

‘We won’t get a clear picture of the health of the economy until the back end of this year, which means the Bank of England isn’t going to rush into any interest rate hikes in the next few months, even if the UK looks to be firing on all cylinders’, he added.  

Disclaimer: AJ Bell is the owner and publisher of Shares Magazine. The author Ian Conway and Editor Tom Sieber own shares in AJ Bell.

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