The number of applicants placed in permanent roles reached its highest level in more than two years last month, according to the latest REC Index.
The latest survey of 600 recruitment consultancies from the Recruitment & Employment Confederation (REC) and business services firm KPMG showed a 26-month high in permanent placements for July.
Permanent placements reached 61 in the REC Index (50 indicating a stable level), a 10 point increase from February 2006.
The number of candidates placed in temporary roles also rose to 64, up from 54 in March 2006.
The engineering and construction sector showed the biggest demand for permanent staff with an index of 63, up from 60 in July 2005. The IT and computing sector also registered an increase at 62, up from 58 last year.
Michael Carter, people services partner at KPMG said: "This month's figures show continuing significant growth in both permanent and temporary placements, but even this has not stemmed the demand for staff. Skills shortages continue to be seen, with the result that employers are paying more for 'quality' candidates, resulting in robust pay inflation.
"The figures are at odds with the rising official unemployment figures, which suggests that labour is available, but not with the skills required," he said.