The UK employment market is staging a recovery that defies the doom-mongers, according to a recruitment veteran with three decades in the trenches. But as with any headline that hints at good news, we must examine the fine print. Is this a genuine turnaround or merely a statistical mirage?
The veteran, whose name is known in City circles but who prefers to let the data speak, has seen it all: the Lawson boom, the dot-com bust, the Great Financial Crisis, and the pandemic. His latest observations suggest that the labour market is not just healing but leading the broader economic recovery. Wage growth, albeit modest, is picking up. Unemployment, despite being a lagging indicator, is drifting lower. And job vacancies are beginning to fill, though not without friction.
But let us not get carried away. The Bank of England, in its infinite wisdom, has been tightening policy with the enthusiasm of a headmaster at a disorderly school. Rate hikes are supposed to cool demand, and they have. Yet the labour market remains stubbornly tight. This suggests that the central bank's transmission mechanism is leaking. Perhaps the fiscal taps, left running by successive Chancellors, are still gurgling. Or perhaps the structural changes wrought by Brexit and the pandemic are creating new inefficiencies that manifest as higher wages for fewer workers.
Investors should pay attention. If the labour market is genuinely tightening, that means wage inflation is a persistent threat. That in turn means the path for interest rates is higher for longer. Gilt yields, already elevated, could climb further. And capital, ever the coward, will flee to safer havens. The pound, which has shown some resilience, may find itself under renewed pressure if the Bank is forced to hike into a slowdown.
So what is the job-hunting secret? The veteran insists it is about adaptability: skills that are transferable, networks that are nurtured, and patience when the market turns. But for the macroeconomic observer, the secret is to watch the flows. Real wages, productivity, participation rates. The headline numbers may cheer, but the undercurrents are what matter. The UK labour market is a ship that has weathered many storms, but the waters ahead remain choppy. The recovery may be leading, but it is a leadership that requires careful navigation, not blind optimism.
