SALARY inflation slumped to its lowest rate in more than two years in September, a closely watched report on the Scottish labour market has found.

And while it signalled the number of people placed into work rose during the month, the growth was lower than the average rate observed by the report in the last two and a half years.

The findings are contained in the latest Bank of Scotland Report on Jobs, published today.

The reading of its labour market barometer, a composite indicator designed to provide a single-figure snapshot of labour market conditions, was measured at 56.6 in September.

While this was up August’s 56.2 it was the September reading was the second-lowest since May 2013 – and well adrift the reading for the UK as a whole.

The findings provide further evidence of the contrasting fortunes on the labour markets on either side of the Border.

The Office for National Statistics released data last week which showed that the jobless total in Scotland rose by 18,000 to 170,000 in the three months from June to August, taking the unemployment rate to 6.1 per cent.

At the same time as the number of people out of work across the UK dropped by 79,000 to 1.77 million across the UK. The 5.4 per cent UK unemployment rate for the three months was the lowest since the summer of 2008.

The ONS also found that weekly pay across the UK, excluding bonuses, was up by 2.8 per cent between June and August compared with the three months last year.

On pay, the Bank of Scotland Report found that the rate of growth in permanent starting salaries slowed in Scotland for the fourth time in the last five months in September, and had dropped to its weakest since August 2013.

The report notes that the corresponding seasonally-adjusted index was still broadly in line with its long run average, with 16 per cent of firms reporting an increase in permanent salaries compared with seven per cent reporting a decrease.

While the equivalent index for the UK showed that salary inflation also eased, to a 20-month low, wage growth for the whole of the UK “remained considerably higher than in Scotland.”

Meanwhile, hourly rates for temporary staff again grew faster than permanent salaries in Scotland, though the rate did slow in September versus August.

The report also noted that the increase in temporary pay rates in Scotland in September was “more marked than across the UK as a whole, where the rate of growth eased to the slowest for one and a half years.”

Dundee saw the sharpest rises in Scotland for staff in permanent and temporary posts, followed by Glasgow, the report concluded.

On staff placements, the report signalled that growth had been weak in September.

While Scottish recruitment consultancies reported faster growth in permanent placements during the period, the increase was found to have been modest compared with the average recorded over the past 31 months. The increases in permanent placements in Dundee and Glasgow were partly offset by reductions in Aberdeen and Edinburgh, the report found.

Dundee saw the fastest rise in temporary billings, ahead of Edinburgh, while decline set in again in Aberdeen. And Glasgow and Dundee saw the sharpest falls in permanent and temporary candidate availability, as Aberdeen made gains on both fronts.

Donald MacRae, chief economist at Bank of Scotland, said: “The number of people appointed to both permanent and temporary jobs rose in September although at a reduced rate compared to last year. Demand for staff grew strongly but increases in starting salaries moderated.

“These results suggest that business confidence in the Scottish economy is holding up despite the slowdown in growth evident earlier in the year.”