The labour market is tight, and there’s currently no let up. As Claire Warnes, Head of Education, Skills and Productivity at KPMG commented, in relation to the latest REC Report on Jobs:
“There’s no end in sight to the deep-seated workforce challenge facing the UK economy. Once again this month, job vacancies are increasing while there are simply not enough candidates in all sectors to fill them. With fewer EU workers, the ongoing effects of the pandemic, the economic impacts of the war in Ukraine and cost of living pressures, many employers will continue to struggle to hire the talent to access the skills they need.”
Does this mean doom and gloom?
It’s tempting to read the latest Report on Jobs with a sense of foreboding. It’s impossible to conceive how the post-pandemic recovery can properly continue with month on month tightening of the labour market. However, this month’s data very much needs to be considered in the wider context of the post-pandemic landscape and this is still shifting.
For example, a strong driver of candidate shortages is that there are higher levels of economic inactivity, with people actively choosing to take themselves out of the job market because of the effect the pandemic has had. We see this particularly with younger people staying in education longer and older people retiring early. This won’t continue forever as people adjust to the ‘new normal’ and come back into play.
In reality, it’s far from doom and gloom, it just demands our attention to manage effectively.
The overriding factors
- Hiring activity is slowing
It’s been a very busy time for hiring, but there are signs that this is easing slightly. Expansion in permanent staff fell to a 12 month low. Candidate shortages are driving this, but it doesn’t detract from the fact that the number of permanent staff appointments still increased for the thirteenth successive month in March 2022. The growth may be slipping, but it’s still very marked. Employers are definitely keen to hire.
- Candidate shortages are problematic
We can’t hide from the intensity of the candidate shortages as the supply of candidates continues to fall. Indeed, the rate of contraction is the most marked we’ve seen for four months, within 13 months of continued falls, led by shortages with permanent candidates. The uncertainty that lingers from the pandemic and the Ukraine war is stalling candidates, but it’s also due to the low unemployment rate and lower numbers of EU workers.
- Starting salary inflation hits new record
As we’ve seen for several months, the above factors are pushing up starting salaries and temporary wages. However, the rate of inflation is now the sharpest seen since records began for permanent staff. The North of England is witnessing the most intense increases.
Demand for staff continues to increase, and the pace of this demand is gathering steam. It’s more notable with permanent roles than in temporary ones, but it’s evident in both. The Office of National Statistics reports that in the three months to February 2022, vacancies were up +114% on the same period in the year before.
With everything that’s going on in the wider picture, it’s no surprise that business confidence in the UK economy is dipping slightly. Nonetheless, employers remain confident in their hiring decisions.
What is important for employers now is to consider how they can widen their candidate pool. They need to consider how to entice workers back from early retirement and consider how to onboard younger people more rapidly and as I mentioned the other day, don’t take for granted the existing staff within the business. Communicate well and do what you can to retain the staff you want to retain.