December 2023 saw a continued rise in candidate availability with economic uncertainty causing redundancies and a slowdown in hiring. Total vacancies fell for the third time in four months.
The latest KPMG REC jobs report revealed a reduction in demand for permanent staff for the 15th successive month, after adjustment for seasonal influences, while growth in temporary vacancies eased to a 37-month low. Permanent staff appointments declined at a faster rate than temp billings.
However, less expected was a sharp increase in the rate of salary inflation for temps and permanent positions. Recruiters told researchers that while competition for suitably qualified staff had contributed to further increases in pay, there were indications that employers’ budgets were under greater pressure.
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There were some quite significant regional variations within the figures, researchers noted. While the north of England and London recorded higher temp billings at the end of the year, declines were seen in the south of England and in the Midlands.
Although there was an overall further fall in demand for staff, the public sector saw an increase in demand during December – the first rise in public sector permanent vacancies in four months. Temporary vacancies saw the same trend but in reverse – they fell in the public sector but increased in the private sector.
The Office for National Statistics found there were 949,000 open roles in December, compared with 1.3 million a year ago. The figure is still higher than in the period just prior to the Covid-19 pandemic (826,000).
Nursing and medical care saw the greatest demand for workers in December; construction, and the IT and computing sectors saw the largest fall in permanent vacancies. For temporary job demand, hotel and catering saw the largest growth in demand for workers and construction and retail, the largest falls.
Although sharp, and quicker than November’s 32-month low, the rate of pay growth was nevertheless the second-softest seen since March 2021. Recruiters said that competition for suitably skilled workers continued to push up pay. However, there were reports that salary inflation was dampened by budgetary pressures at clients.
The higher cost of living and shortages of skilled workers saw recruitment consultancies record a further growth in average hourly wages for temp staff with the rate of pay growth being the quickest since August.
According to the ONS employee earnings rose 7.2% year-on-year over the three months to October 2023. The slowdown in pay growth in recent months was more pronounced in the public sector, largely due to one-off payments across the NHS and civil service over the summer, according to the ONS.
‘Lacklustre’ outlook
Justine Andrew, partner and head of education, skills and productivity at KPMG UK, described the end of the year as “muted” for the labour market, which “despite some loosening during 2023, continues to be tight”. She blamed a “lacklustre” economic outlook that had “driven a further decline in permanent job opportunities, while we continue to see a rising number of people looking for new work.”
However, she added: “For those lucky enough to start a new role there was another sharp increase in starting salaries
due to competition for skilled workers. But the rise wasn’t as high as those seen in recent months as businesses face ongoing pressure on their budgets.” She noted: “Recruiters tell us this pressure is now impacting temporary contracts, with fewer people employed on a short-term basis.”
Positive sign
For Neil Carberry, REC chief executive, there was some optimism in that the slowdown was “easing a bit”. Given that December was a time when employers generally postponed activity into the new year, “this is a positive sign that the labour market is weathering the current economic storm.”
He added: “Rising demand for healthcare staff emphasises again the importance of supporting NHS performance. Recruiters can see the impact on long NHS waiting lists in the supply of candidates looking for work – addressing this will be a key way to tackle inactivity. But the plan for NHS staffing needs to deal with 21st century labour market realities. Medical staff have choices in and power over their careers – working with unions, agencies and other stakeholders on a plan will get the NHS farther than diktat from Whitehall.
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