Skills shortages leads to high wage inflation

The Scottish recruitment market continued to perform strongly in April with the rate of improvement picking up on the previous month, the latest Bank of Scotland Labour Market Report showed. Rising staff appointments continued to be underpinned by strengthened demand for staff by employers. Meanwhile, with growing skill shortages amongst available candidates, the rate of wage inflation continued to rise.


Summary for April 2004

The reportís unique ëbarometerí for Scotland rose to its highest level since data was first collected in January 2003 and continued to close in on the UK average.

Edinburgh again recorded the sharpest rise in the number of people placed in permanent jobs of Scotlandís four main cities in April.

Recruitment consultancies in Scotland reported that their permanent and temp business rose markedly again in April. Permanent staff placements rose for the ninth successive month, whilst billings received from the employment of temporary staff increased for the fourteenth month running.

Rising staff appointments continued to be underpinned by strengthened demand for staff by employers, as improved business confidence led to a rising number of new job openings.

The job market in Scotland tightened at a faster rate in April following sharper deteriorations in the availability of permanent and temporary candidates. Consultancies generally attributed lower candidate availability to strong growth of staff placements and fewer redundancies.

Commenting, Tim Crawford, Group Economist at Bank of Scotland, said:

ìThe latest Bank of Scotland Monthly Labour Market Report gives a clear indication as to how the strengthening Scottish economy is leading to a tightening of the jobs market. With increasing skill shortages for a range of trades, wage inflation continued to accelerate in April. Recruitment consultancies have attributed strengthened demand for staff to improved business confidence at clients. î


Regional analysis ëGlasgow sees sharpest increase in salariesí

Edinburgh again recorded the sharpest rise in the number of people placed in permanent jobs of Scotlandís four main cities in April. This was followed by Aberdeen, where staff placements resumed growth after a negative Q1. Recruitment consultancies in Glasgow indicated a solid rise in permanent staff placements, whilst growth of permanent staff placements in Dundee was marginal. All of Scotlandís four main cities recorded a marked rise in temporary staff billings in April, with the sharpest gains seen in Edinburgh and Dundee.

Average starting salaries awarded to people taking up new positions across Scotlandís four main cities all rose in April compared to March. The sharpest increase in salaries was seen in Glasgow, where consultancies reported that a sharp deterioration in candidate availability had resulted in widening skill shortages. Edinburgh saw the sharpest increases in tempsí pay rates, followed closely by Aberdeen.


Wages and salaries ëTightening job market contributed to higher wage inflationí

Rising skill shortages amongst available candidates, coupled with strong demand for staff, pushed pay rates higher in April.

Average starting salaries offered to candidates taking up permanent positions in Scotland rose strongly again in April ñ the tenth consecutive monthly rise. Furthermore, the rate of growth of salaries picked up slightly on the previous month and remained above the UK average.

Growth of temporary/contract staff hourly pay rates also remained buoyant in April, with the rate of increase picking up marginally compared to the previous month.

EmploymentëPermanent staff placements rose strongly againí

The number of people placed in permanent jobs by recruitment consultancies in Scotland increased for the ninth successive month in April. The rate of increase eased marginally compared to the previous month, but nevertheless remained strong.

Meanwhile, agencies billings received from the employment of temporary and contract staff continued to exceed that recorded in the previous month in April. The rate of growth remained buoyant, but was less marked than that seen in February and March.


Vacancies ëImproved business confidenceí

Recruitment consultancies reported that improved business confidence has led to strengthened demand for permanent staff by employers.. Moreover, with the index for permanent staff vacancies rose Scotland for the eleventh month in a row to 61.2, from 60.5 in March. The rate of expansion of demand for staff in Scotland outpaced the UK average for the first time since last September.

Demand for temporary and contract staff in Scotland rose strongly again in April. Furthermore, an increase in the seasonally adjusted Temporary Staff Vacancies Index to 60.4, suggested that the rate of growth of demand for staff picked up on the levels recorded through the final quarter of 2003 and the first quarter of 2004.

Skill shortages were heightened through a further deterioration in candidate availability in April. The availability of candidates to fill permanent vacancies at employers fell for the second consecutive month, although the rate of deterioration was only modest and less severe than the UK average.

Sectoral ëBroad-based increase in job openings across staffing sectorsí

Recruitment consultancies reported that demand strengthened for all main types of employee in April, although the rate of growth of demand for staff varied markedly by sector.

For permanent staff, the strongest demand was reported for those types of employee associated with the upper end of the job market, namely IT/Computing, Accounting/Financial and Executive/ Professional staff.

Demand for Blue Collar staff remained the strongest of all main categories of temporary staff, followed Engineering/Construction staff.


The Bank of Scotland Labour Market Barometer
A key tool in the Monthly Labour Market Report is the Bank of Scotland Labour Market Barometer. The Barometer is a composite indicator devised from four key measures: demand for staff; employment (appointments); availability for work; and pay in the permanent and temporary markets.

The Barometer implied that the rate of improvement in Scottish labour market conditions picked up again in April. Furthermore, at 58.3 (up from 57.5 in March), the Barometer registered its highest reading since the series began in January 2003.

The rise in the Barometer in April reflected accelerations in the rate of growth of overall demand for staff and staff pay rates. The staff availability component of the Barometer also yielded a stronger positive contribution (the index is inverted in the calculation of the Barometer). Staff appointments continued to exert a positive contribution on the Barometer, but to less of a degree than in March.

The gap between the Barometer for Scotland and the equivalent UK index narrowed again, suggesting that the rate of improvement in Scottish job market conditions is closing in on the UK average.

UK regional labour market summary

In Scotland, the number of people registered as jobless and seeking work at jobcentres fell by some three thousand to 95,900 in March. This equated to 3.6% of the working population, compared to 3.7% in February. Moreover, the claimant count rate in Scotland is now at its lowest since July 1975.

The number of people officially registered as jobless and seeking work at UK job centres fell again in March, to 882,000 -- equivalent to 2.9% of the working population.
The lowest claimant count rates continued to be found in the South East and South West (1.7% for both regions). Meanwhile, the North East again recorded the highest claimant count rate in March (4.3%).