Fastest wage growth rate for six years adds to recovery hope

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WAGES in Britain grew at their fastest rate in six years during November, a labour market survey indicated this week, providing a rare signal that a long-term decline in real incomes is being checked by a return to economic growth.

Prices have been consistently outpacing wages in Britain in recent years, squeezing household budgets and making the cost of living a key political battleground ahead of a general election in 2015.

However, last month starting salaries for permanent staff rose at their highest rate since November 2007, according to survey data from the Recruitment and Employment Confederation and consultancy KPMG, which has offices in Leeds and Manchester.

The survey’s pay index has been steadily rising in recent months and in November hit 59.7, up from 57.6 in October.

Recruitment and Employment Confederation chief executive Kevin Green said he expected salaries to keep increasing into 2014.

The survey focuses only on data from recruitment agencies, and so is not fully representative of the labour market, but nevertheless suggests that Britain’s unexpectedly strong economic recovery this year is having an impact on earnings.

A recovery in real wages, if borne out by other jobs data, would help Prime Minister David Cameron’s government to blunt allegations by the opposition Labour party that it has not done enough to help households cope with rising costs.

The state of the labour market is also closely watched by investors because it plays a key role in the Bank of England’s monetary policy.

The unemployment rate fell last month, bringing it closer to the level at which the central bank says it will consider raising interest rates.

The REC/KPMG survey also indicated that the number of people finding jobs had grown and demand for staff had hit a 15-year peak, adding more weight to the market’s view that a rate hike may come as early as December 2014, sooner than implied by official projections.