Next year is likely to be a tough one for employers, who will be under pressure on pay and prices while at the same time finding it harder than ever to recruit the right people into vacant jobs.
The warning from the Chartered Institute of Personnel and Development has followed the publication by the Government of monthly job statistics
The Office for National Statistics figures showed a definite tightening of the jobs’ market, with more people in employment, fewer being made redundant and a reduction in the number of job vacancies.
Compounding this, the growth in average earnings, both including and excluding bonuses, had increased.
CIPD chief economist John Philpott said the figures presented the Bank of England’s Monetary Policy Committee, which sets interest rates, with a dilemma.
“Following a mid-year hiatus, a combination of rising employment, falling unemployment and increased numbers of economically inactive people has turned up the heat in an already tight labour market,” he explained.
“Signs of mounting pay pressure in the autumn months, especially in the public sector, are a particular cause for concern given that current and future pay demands are being driven up by rising retail price inflation,” he added.
The figures will also be a worry for the Treasury, particularly the potential impact of higher pay costs on an already delicate public spending and borrowing position, he argued.
“Employers in general will face a tough bargaining environment and will have to take action to contain wage costs if profits and investment plans are not to be squeezed,” said Philpott.