Report on Jobs: Muted confidence around the economic outlook drives steeper drop in permanent placements

• Permanent placements fall at quickest rate since June 2020
• Upturn in candidate availability gathers pace
• Pay pressures ease only slightly amid rising cost of living

Summary

Hiring activity across the UK continued to be dampened by a weak economic outlook and reduced confidence among businesses, according to the latest KPMG and REC, UK Report on Jobs survey, compiled by S&P Global. Permanent placements contracted at the quickest rate for just over three years, while temp billings growth weakened notably from June.

The overall availability of staff meanwhile rose at a substantial pace amid the slowdown in recruitment and reports of redundancies. Notably, the latest upturn in total labour supply was the steepest recorded since October 2009 when excluding the pandemic period. While there were signs of pay pressures moderating again in July, permanent salaries continued to rise at a sharp pace overall. Total vacancy growth meanwhile slowed further, hitting a 29-month low in July.

The report is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 UK recruitment and employment consultancies.

Accelerated drop in permanent staff appointments

A weaker economic climate and reduced market confidence weighed on recruitment activity during July, according to the latest survey data. Permanent staff appointments declined at the steepest pace for just over three years, as concerns over the outlook made clients hesitant to commit to new staff. Concurrently, growth in temp billings edged down to a fractional pace that was the slowest recorded since last October.


 

Sharper rise in candidate availability

The latest survey showed that faster increases in the supply of both temporary and permanent workers drove the sharpest upturn in overall labour supply since December 2020. There were frequent reports that redundancies and hiring freezes had underpinned the latest improvement in staff availability.

Salary inflation edges lower, but remains marked overall

Competition for skilled candidates and the increased cost of living continued to place upward pressure on rates of starting pay during July. Salaries for newly-placed permanent workers rose sharply, despite the rate of inflation slipping to the lowest since April 2021. Temp pay meanwhile increased at the softest pace in 29 months, albeit solidly overall.

Overall vacancies expand at slowest rate in 29 months

Growth of demand for staff continued to moderate at the start of the third quarter. Notably, total vacancies increased at the slowest pace in 29 months, and one that was well below the series trend. The latest upturn in demand for permanent workers was the weakest seen over the current period of recovery that began in March 2021. Concurrently, the rate of short-term vacancy growth was among the slowest recorded over the past three years.

Regional and Sector Variations

All four monitored English regions posted a decline in permanent placements, led by London.

Divergent trends were seen for temp billings, which rose in the Midlands and London, but fell in the North and South of England.

The latest survey highlighted slightly stronger increases in demand for staff in the private sector, but rates of vacancy growth cooled in the public sector. The strongest overall upturn in demand was signalled for temporary workers in the private sector. Meanwhile, the weakest increase in vacancies was seen for short-term roles in the public sector, which rose only marginally.

Demand for permanent workers increased across the majority of monitored sectors during July. Blue Collar topped the rankings, closely followed by Hotel & Catering. However, demand for permanent staff in the IT & Computing and Secretarial/Clerical sectors weakened.

Hotel & Catering saw by far the steepest upturn in demand for temp workers of all ten categories in July. Strong rates of vacancy growth were also noted for Engineering and Blue Collar personnel. The Construction and Secretarial/Clerical sectors saw modest drops in demand.

Neil Carberry, REC Chief Executive, said:

“The jobs market overall remains fairly robust, with vacancies and pay still rising and unemployment low but there is a sense in today’s report that the economy will need some growth soon to sustain this positive picture. Permanent hiring has been slowing all year. To some extent this is normalisation as the post-pandemic boom abates – but it is also driven by uncertainty. This is seen in the scale of companies reshaping themselves while hiring in other areas – recruiters report that the quickest rise in labour supply since the pandemic has been driven by an increase in redundancies. But it is also obvious in the way firms are relying on temporary labour to keep things going in uncertain times. Temping keeps people in work when firms are uncertain about the future path of the economy – it is a huge UK success story.

“Hiring overall is still at a good level, and some sectors remain under pressure from significant labour shortages, including hospitality and construction – so there is opportunity out there for job seekers. But today’s report emphasises again that sustained positivity in our labour market rests on economic growth and investment in the UK. A proper industrial strategy that tackles the big issues we face and which fully encompasses workforce thinking around skills, transport, access to work and immigration is long overdue.”

Claire Warnes, Partner, Skills and Productivity at KPMG UK, said:

“The latest survey results reflect the current Summer weather – damp, but with some possible bright skies on the horizon.

“Recruiters told us that their clients aren’t yet confident enough in the economic outlook to commit to permanent hires, leading to the steepest pace of decline in placements since June 2020. Conversely, the growth in billings for temporary workers weakened last month as job hunters hold out for permanent roles.

“Businesses are also still freezing hiring, with some redundancies, which led to the sharpest upturn in labour supply since December 2020. This is good news for recruiters who have an even larger pool of candidates to place, but with the number of vacancies available increasing at the slowest pace for nearly two and a half years, supply and demand are once again off balance.

“For job seekers, the ongoing competition for skilled workers and cost of living pressures are keeping starting salaries high, making it an attractive time to move roles, though they may be cautious about doing so.

“To rebalance the labour market and aid economic recovery, more focus on reversing the deepening skills gap would be a step in the right direction.”

Contact

For more information and interview enquiries, contact the REC Press Office on 020 7009 2192, 020 7009 2157 or pressoffice@rec.uk.com. Outside of regular office hours, please call 07702 568 829.

For further information on the survey methodology, or for full reports and historical data from the Report on Jobs, please contact economics@ihsmarkit.com.

If you are a recruitment business and interested in joining the Report on Jobs survey panel, you can sign up here. By joining the panel, you will get free access to the full Report on Jobs each month.

Disclaimer

The intellectual property rights to the data provided herein are owned by or licensed to S&P Global and/or its affiliates. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without S&P Global’s prior consent. S&P Global shall not have any liability, duty or obligation for or relating to the content or information (“data”) contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall S&P Global be liable for any special, incidental, or consequential damages, arising out of the use of the data.

This Content was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global. Reproduction of any information, data or material, including ratings (“Content”) in any form is prohibited except with the prior written permission of the relevant party. Such party, its affiliates and suppliers (“Content Providers”) do not guarantee the accuracy, adequacy, completeness, timeliness or availability of any Content and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such Content. In no event shall Content Providers be liable for any damages, costs, expenses, legal fees, or losses (including lost income or lost profit and opportunity costs) in connection with any use of the Content.