The rate of hiring new employees was its slowest since March 2021 in May as businesses struggled to find candidates.
This deceleration saw the Recruitment and Employment Confederation and KPMG’s permanent jobs index fall to 59.2 from a peak of 71.5 last September (a figure above 50 indicates growth).
At the same time, there was a steep increase in demand for staff, although vacancy growth slowed to a three-month low, the REC said.
Rates of pay also continued to rise sharply as employers tried to lure candidates in, particularly in permanent positions. Pay rose at one of the quickest rates captured by the survey since it began in 1997.
The figures showed the number of permanent candidates continued to decline at a faster pace than temporary workers, although the reduction in short-term staff supply was the least severe in just over a year. Demand for short-term staff increased at its softest pace in five months.
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IT and computing posted the strongest increase in demand for permanent staff, followed by hotel and catering. The highest demand for short-term staff was – perhaps predictably – in hotel and catering. The increase was least marked in retail.
Neil Carberry, chief executive of the REC, said it was “a hugely positive jobs market if you are looking for work”, but was challenging for those looking to hire.
“The market for temporary work is stabilising faster than for permanent staff, which could suggest a little caution creeping into employers’ thinking in the face of high inflation,” he added.
“But compared to pre-pandemic, labour supply is still the big issue we have to solve. With over half a million people missing from the jobs market, and demand still growing strongly, this is a big, strategic issue for the UK.
Growth is essential to funding public services and paying higher wages sustainably. Any plan for growth must include action to help people into work from inactivity, skills reform, support for innovation on productivity and targeted immigration reform.”
Claire Warnes, head of education, skills and productivity at KPMG UK, said there had been a “sustained mismatch” in the number of vacancies and supply of candidates for more than a year.
She said: “The initial effects of this have been obvious, in particular the driving up of starting salaries. However, perhaps we are starting to see wider consequences of the systemic issues in the available workforce to support the growth opportunities which employers are chasing.
“Candidate availability is still falling, so it remains a hot market for those well-qualified in their sectors. But are employers starting to rethink their growth plans because of skills shortages which are proving difficult to fix as quickly as they need?”
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She added that rising business costs and supply chain disruption could test the resilience of employers in the coming months, and the impact on recruiters’ confidence would need to be closely monitored.
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