(Bloomberg) -- British companies lifted wages at the fastest pace since January in postings for jobs they have open, a source of lingering inflationary pressure that may complicate the case for an interest-rate cut.

Advertised pay on the Indeed jobs search site rose by 6.5% in the year to May, with lower paid roles in sectors like childcare, retail and hospitality seeing the strongest gains at more than 8%. Part of that was due to a 9.8% jump in the minimum wage in April, but it also reflects worker shortages since the pandemic.

The figures provide a more up-to-date snapshot of trends in the labor market, which the Bank of England is watching carefully for signs of upward pressure on prices. Policy makers have said wage growth remains too fast to be compatible with the UK’s 2% inflation target, an issue that may force borrowing costs to remain at a 16-year high for a little longer.

“Despite the fact that hiring demand has cooled significantly, there remains some residual tightness in the labor market,” said Jack Kennedy, senior economist at Indeed UK. “That’s particularly true at the lower-paid end. It’s something that’s going to complicate things for the MPC.”

UK job postings fell 20% in June from a year ago, Indeed said. Vacancies slipped below pre-Covid levels for the first time in another sign that the labor market continued to loosen. The UK’s official unemployment rate also climbed to a two-year high in the three months to April, ONS data showed earlier this month.

Persistent labor shortages could continue to fuel pay pressures even as the effects of the higher minimum wage policy start to wane. About a quarter of the UK’s working age population is inactive, the highest level since 2015, while the number of long-term sick reached a new record of 2.83 million in April. 

Kennedy warned that’s disproportionately impacting lower-paid sectors, which find it harder to fill that talent gap with overseas workers after Britain’s departure from the European Union. 

Indeed figures also showed foreign appetite for UK jobs rose 40% from pre-Covid levels. About 5% of searches for UK postings came from overseas candidates in May, driven by demand for high-skill roles in technology, engineering, healthcare and finance. 

Still, businesses are finding it hard to fill these jobs with foreign applicants due to the government’s tougher migration rules, which include raising the salary needed to get a work visa by 50%.

Wage pressures could get worse as economic activity picks up after the July election, predicted by polls to be won by the opposition Labour Party, without a matching increase in the supply of workers.

“We are approaching the point where the BOE will potentially start cutting interest rates; we might also see a bit more business confidence post-election in terms of an end of the ‘wait and see’ attitude that some employers might be having,” Kennedy said. “That could support hiring demand and that could feed through continued wage pressures.”

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