London jobs boom just keeps on going with further unemployment falls in sight

Jasper Jolly
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Survey evidence shows more signs of a tight London labour market (Source: Getty)

London is creating jobs at the fastest rate in over a year, with the UK's employment boom showing no sign of abating.

An index tracking employment levels in the capital rose to 53.1 last month, up from 52.8 in June, according to regional figures from the closely followed purchasing managers’ index (PMI) compiled by data giant IHS Markit.

The numbers, published this morning, represent the fastest increase in London job creation since April 2016.

Read more: Brexit battle heats up: London is outpacing EU rivals despite job moves

Firms across the UK expect further increases in employment to come, according to a separate survey of more than 1,000 firms published today by the Chartered Institute of Personnel and Development (CIPD).

The balance of firms who expect to add more jobs during the current quarter rose from 20 per cent to 27 per cent during the past three months, the CIPD survey showed, the steepest rise since the spring of 2016.

The new data follows figures published by the Recruitment and Employment Confederation (REC) last week, which showed permanent staff placements jumping to their highest level in over two years.

Unemployment across the UK has continued to fall steadily despite being at historically tight levels. Only 4.5 per cent of the labour force was out of work in the three months to May, the lowest rate since the 1970s.

Paul Evans, London regional director at Lloyds Bank Commercial Banking, which commissioned the PMI survey published today, said: “London business activity gained momentum at the start of the third quarter. Companies are keen to take on more staff, despite higher salaries affecting their margins and feeling less certain about their future.”

The Bank of England now expects employment to fall as low as 4.4 per cent by September, although City economists mostly expect the headline unemployment rate for June, published on Wednesday, to remained unchanged.

Meanwhile the employment rate, the proportion of working-age adults in the labour market, stands at 74.9 per cent, the highest since records began in 1971.

Read more: Perfect storm: As inflation rises, UK wage growth is worryingly weak

However, despite the historically tight labour market, the prospects for wages to rise continue to look weak. Economists generally expect lower unemployment to lead to upward pressure on wages, but signs of that pressure have been lacking in recent months.

Employers have broadened their recruitment net and invested in technology rather than increasing pay, according to Gerwyn Davies, CIPD senior labour market analyst. He said: “It seems that employers are becoming much more flexible in the face of a tighter labour market.”

Wages grew by only 1.8 per cent in the year to May, according to the Office for National Statistics, with the Bank of England warning earlier this month that sluggish productivity growth along with added uncertainty over the economic outlook during the Brexit process may be preventing Britons from pushing for higher pay packets.

The slow rise in wage growth, a domestic inflationary pressure, has been a key reason for the Bank’s caution in raising interest rates, despite above-target inflation.

Read more: Consumer confidence has fallen for the third quarter running

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