Both hiring and wage growth slowed during August, suggesting the UK job’s market has begun to cool.
According to the latest figures from KPMG and the Recruitment and Employment Confederation, an expansion in the number of workers available and organisations being more cautious about recruitment meant the Report on Jobs employment index went down in August from 42.4 to 38.9.
Permanent placements contracted at the quickest pace since June 2020, KPMG and the REC found. Part-time hiring also slowed, with this index falling to 49.5 – the first time temporary recruitment has fallen since July 2020.
It is also the first time that both permanent and part-time indicators have fallen below the 50-point threshold that separates growth from contraction.
Hospitality, accounting, logistics, manufacturing, engineering and healthcare all continued to show growth in both permanent and temporary placements.
Jobs market in August
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Demand for permanent healthcare professionals rose for the 37th consecutive month.
Permanent placements fell rapidly across all regions, the data showed, but most dramatically in the MIdlands. London recorded the quickest reduction in temporary placements.
The Bank of England has previously called for wage restraint in order to curb high inflation. In July, inflation in the UK dropped to 6.8%, and pay awards fell below 6% for the first time this year.
REC chief executive Neil Carberry said August is typically slower for permanent roles, but that 2023 demonstrated a “lack of confidence to start the new hiring we saw among firms in the Spring”.
“As inflation begins to drop, it is likely that firms will return to the market later in the year – employer surveys suggest confidence may be returning. But for now, the labour market has more slack than it has since the heights of the first lockdown,” he said.
Claire Warnes, skills and productivity partner at KPMG UK, said: “If you’re looking for a new role the market remains in your favour, as starting pay continues to be driven up by inflationary pressures and a high demand for candidates with specific skills across many sectors.
“For recruiters, the picture is still complex. Despite an increasing pool of candidates this month, the economic outlook is keeping businesses cautious. Many employers aren’t ready to commit to permanent roles, and those who are indicate they cannot find candidates with the right skills, causing these placements to fall at a rapid pace during August – the sharpest for three years.”
The fact a number of sectors are bucking the temporary hiring trend was a reflection on the need for crucial skills in those areas, she added.
“As the appetite for tech and AI expertise keeps increasing, the IT sector needs temporary workers to support more projects.
“The underlying issue is that skills – or a lack of them – remain central to the tensions in today’s labour market, and significant investment now for the long term prospects of the economy is vital.”
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