Neil Carberry, REC Chief Executive, succinctly sums up the latest KPMG/REC Report on Jobs by saying,
In many ways, the labour market is marking time waiting for the brakes to be taken off growth by the Bank of England.
It’s believed that interest rates are at, or near, their peak, and inflation is slowly stabilising and edging downwards. But it’s no surprise that businesses are sitting tight, waiting to see how things develop before committing to ongoing growth and hiring plans.
Nonetheless, the data still reveals how robust the jobs market is in the UK. As is typical, employers are utilising temps to ensure success and profitability despite wider uncertainty. The recent sharp declines in permanent hiring are softening, but employers turn to temps to keep the wheels turning as expected.
Let’s look at the headlines in more detail.
Permanent staff hires are falling but at a softer rate
As anticipated, due to the broader economy, we’ve witnessed thirteen months of falls in the number of people securing new permanent jobs. However, while employers are still understandably cautious, it’s worth noting that the rate of decline recorded last month was the softest since June. It’s also essential to view this in context: employers are still hiring and just turning to temps. The data shows this with “back-to-back” rises in temporary numbers.
This situation is expected, given wide caution over the economic outlook. It’s typical for hiring freezes while employers take stock at these times, but using temps allows businesses to meet demand with greater flexibility.
Candidate supply continues to improve
After long stretches of poor candidate supply, there have been eight months of increased candidate numbers. This is the flip side of subdued hiring activity. Data indicates this is also partly due to increasing organisational restructuring and redundancies. Last month saw a reasonably sharp increase in the availability of candidates for both temporary and permanent roles, with the strongest rate of growth recorded since December 2020.
Pay continues to rise but is easing
We’ve seen consistent starting salary inflation for a very long stretch. However, this has now eased to a 31-month low. That means permanent salaries and temporary wages are still rising, but not as intensely. Despite the softening, it’s worth noting that the increases are still sharp as employers need to work hard to attract the best candidates in the cost of living crisis. The North of England is leading the increases in temp wages.
It’s worth noting that a closer look at data from the Office for National Statistics (ONS) reveals that the difference between the public and private sectors is affecting the overall picture somewhat. While there was a +8.1% rise in employee earnings in the three months to August 2023, indicating one of the sharpest periods of pay growth on record, this average was pushed up by one-off payments in public sector areas like the NHS and civil service.
Demand for staff stabilises
Since permanent staff vacancies dipped slightly and temporary vacancies increased somewhat, there was a stable picture for overall vacancy numbers in October. As stated, at times of uncertainty, businesses typically turn to temps to meet staff demand while retaining flexibility. It’s this adaptability that characterises the resilience of the UK labour market.
Again, it’s also worth looking more closely at the data to reveal what matters to individual employers. For example, there’s still an increase in demand for staff in the private sector (both permanent and temporary). The broader picture also reveals that the total number of vacancies is also still 20% above pre-pandemic levels. Furthermore, there’s particular demand for permanent roles in sectors like accounting/financial and engineering.
The brakes are on, but the rate at which recruitment was expanding was not sustainable and hindered by intense candidate shortages. As such, while it’s a tricky time for some, especially amidst potential redundancies, it’s far from a picture of doom and gloom. Indeed, there is strength in the UK jobs market and flexibility that enables it to adapt to the moment. This means there are excellent opportunities for candidates and employers.
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Recruitment Outlook Report – Oct23