Wages fall for eighth consecutive month but upturn could be on the way

Pinsent Masons employment partner Tom Flanagan says that even when the end of the recession is in sight we can expect to see a significant number of smaller redundancy exercises for a year or two afterwards.

Starting salaries have fallen for permanent and temporary staff for the eighth consecutive month, but there is “more confidence” in the jobs market, according to a report.

The monthly Report on Jobs by the Recruitment and Employment Confederation (REC) and professional services firm KPMG showed average starting salaries for permanent staff continued to fall for the eighth month in a row in May to reach 40.7, on a scale where 50 means no change, although this was up 0.3 points from April and was the slowest decrease so far this year.

Contract pay rates also dropped for the eighth straight month to 40.6 in May, from 41.1 in April, which consultants attributed to supply of temporary workers outstripping demand.

The report also showed that job vacancies were continuing to fall, albeit at their slowest rate in seven months. Demand for temporary placements rose to 40.1 last month from 38.9 in April, on a scale where 50 means no change. Permanent placements fell at the slowest rate for 10 months in May, up to an index reading of 41.7 in May – where 50 means no change – from 37.3 in April.

However, while the index is still showing a decline in wages and jobs, there are early signs of an economic upturn approaching, according to REC chief executive Kevin Green. Two-thirds of recruiters reported a stable or increased demand for temporary staff in May, he said.

He told Personnel Today: “Overall, these numbers show there is a little bit more confidence in the jobs market and the majority of [recruitment] consultants believe things got a little better in May. Things aren’t as bad as they were anymore, and when we see demand returning for temporary work – that will be the turning point.”

Mike Stevens, partner and head of business services at KPMG, said: “Demand for staff is still falling but much less fast than at the beginning of the year, and many employers seem to be holding off shedding staff and contemplating recruitment.”

Last month, Green said it was unlikely there would be an increase in demand for permanent and temporary staff before September.

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