Jobs growth set to slow, but wage growth to strengthen – CBI

Nick Elvin

The pace of jobs growth in the UK looks set to slow as productivity gradually picks up. That was one of the messages from the CBI’s latest quarterly economic forecast, which suggests that the UK economy remains resilient in the face of wider fears for global growth.

While the business organisation says job creation will ease, it predicts an improved level of pay growth of 3.2% in 2016. Furthermore, the unemployment rate is likely to level out in 2017, at 5.1%.

The forecast reveals solid overall economic growth, despite a modest downgrade for 2015, from the 2.6% predicted in August to 2.4%. The CBI says this reflects weaker investment growth, driven largely by recent changes to official data. Next year the business group expects the UK economy to grow at 2.6%, down from 2.8%, as a somewhat gloomier global outlook means that net trade will drag on growth.

The CBI also expects inflation to pick up from the end of the year, moving towards the Bank of England’s target of 2% from mid-2017 onwards. Concerns over the global economy have been flagged by the Bank of England’s Monetary Policy Committee – consequently, the CBI now believes an interest rate rise is likelier Q2 next year, rather than Q1 as predicted in its previous forecast.

The CBI also unveiled its first forecast for 2017, predicting solid UK growth at 2.4%, with a gradual rise in inflation easing household spending.

John Cridland, CBI director-general, said: “The UK economy’s continued strong performance is a clear sign of its resilience in the face of turbulent times overseas.

“Manufacturers are enduring tougher conditions, as a persistently strong pound is hamstringing our export competitiveness, alongside dampened global growth. But our domestic story is strong and overall we are now in a phase of stable but solid economic growth.

“Mark Carney, the Bank of England governor, has already signalled that an interest rate rise will be limited and gradual when it comes. We know that businesses are prepared for this.

“Overall we must continue to put solid foundations in place to support the economy. That means ploughing ahead with critical infrastructure decisions, such as aviation capacity, maintaining flexibility in our labour market and keeping an open door to businesses and talent from abroad that create jobs and boost our economy.”

The CBI’s job forecast follows last week’s REC/KPMG Report on Jobs for October which showed a solid growth in permanent and temporary staff placements and pay rates. However, it added, the availability of staff to fill both permanent and temporary job roles fell further last month.

Meanwhile the latest ONS labour market statistics show that the UK employment rate has risen to a new record high of 73.7%, while average pay has grown 3% over the last year and the unemployment rate of 5.3% is the lowest since early 2008.