As I am heading off to the House of Commons early next week to discuss the skills shortages faced by businesses and how these impact the UK economy, the latest Report on Jobs from the REC is particularly revealing. Talking with ministers about how to create a sustainable labour market is essential as part of my role on the board of directors for the REC, and doing this from a position of insight into the current state of play is important. To help you understand the latest information that affects employers and employees, read my summary below.
Uncertainty and resilience
Every aspect of the latest data underlines the uncertainty that employers and candidates feel at the moment, but also the resilience that the UK labour market is known for. The recent JobsOutlook report revealed that business confidence fell by a further 5% from the previous quarter and this is reflected by a similar drop in confidence for employers making hiring decisions.
- Uncertainty affects recruitment
Uncertainty always affects recruitment. Employers are wary and candidates are wary. However, there have been increases in both permanent and temporary appointments in August. What we are seeing, however, is that the rate of placement growth is reducing. In short, demand is still high but it’s easing off at the second-slowest recorded rate in 18 months. Temp numbers increased for the twenty-fifth month in a row in August, and remain sharp. Temp staff are extremely useful to employers during times of uncertainty.
- Vacancies expanded at slowest rate for 18 months
We’ve witnessed the number of vacancies growing rapidly for 18 months on the back of the pandemic. However, this demand is easing off. This is backed up by data from the Office of National Statistics (ONS) which revealed that there was a small fall in the total number of vacancies during the three months to July from 1,294,000 to 1,274,000. This is the first three-month-on-three-month decline in almost two years. Nonetheless, the actual numbers remain incredibly high.
- Softest increase in starting salaries since June 2021
In the face of candidate shortages and rampant recruitment activity, it’s been no surprise that starting salaries and temporary worker’s wages have been rising rapidly of late. However, while these rates have continued apace, there are some indications that things are easing. In March we saw survey record highs, whereas now salary growth is the softest it’s been for a year. Data from the ONS supports these findings. It also reveals that the slightly weaker rate of growth is being driven by a slower increase in private sector pay.
- Candidate supply continues to fall, but more weakly
Candidate supply concerns remain and will continue to do so. However, while the numbers of available candidates continued to fall sharply in August, it has eased slightly and represents the softest fall in 16 months. This picture is particularly relevant for permanent staff. Skills shortages as well as factors such as low unemployment, uncertainty and fewer foreign workers all come into play here. It’s worth noting that the quickest fall in permanent candidate numbers was evidenced in the North of England.
As Neil Carberry, Chief Executive of the REC has said,
“The big question is now about the sustainability of this positive position, as labour shortages damage growth and pay over the long term. Controlling inflation and a clear plan for growth are essential parts of making sure the UK is resilient to economic uncertainty.”
I hope that talking with ministers next week will help them to address shortages – in candidates and skills – across the labour market.
We publish an overview of the REC/KPMG Jobs Outlook Report each month to keep you up to date with the UK recruitment and jobs market month by month.