The latest KPMG and REC UK Jobs Report for January found that while permanent placements have decline, temp billings have risen further and the overall labour supply continued to fall.
And while recruitment efforts have been dampened by ongoing candidate shortages, there were further signs of the downturn in labour supply easing in January.
The report found that overall vacancy growth picked up for the first time in nine months but remained slower than the survey’s average.
Pay pressures remained historically strong, as firms responded to greater competition for staff and the rising cost of living by increasing salaries and wages.
Permanent staff appointments fell for the fourth month in a row and firms instead often leaned on temporary workers to fill vacancies.
Recruiters signalled a stronger increase in demand for staff during January, with overall vacancies expanding at the quickest rate for three months; however, the upturn remained softer than the survey’s long-run trend. Temp vacancies rose at a stronger rate than permanent staff demand, but there was an improvement in growth for the latter and a slowdown for the former.
Starting salaries continued to climb sharply in January. The rate of inflation continued to soften from March 2022’s record high, however, and was the slowest seen in 21 months. In contrast, temp pay inflation quickened to a four-month high at the start of the year. According to recruiters, candidate shortages pushed up rates of starting pay, while there were also mentions of the rising cost of living placing upward pressure on salaries and wages.
The downturn in total candidate supply moderated further at the start of the year. Though solid, the rate of contraction was the softest seen since March 2021 and much slower than the average over 2022 as a whole. A weaker fall in permanent labour supply helped offset a quicker drop in temp candidate numbers. Recruiters frequently mentioned that the uncertain economic climate, concerns over job security, and generally tight labour market conditions had limited the availability of workers.
Rates of vacancy growth in the private sector continued to exceed those seen for the public sector at the start of 2023. The strongest upturn in demand was signalled for private sector permanent staff, while the softest was seen for permanent workers in the public sector.
Nine of the 10 monitored job categories registered an increase in permanent staff demand in January, with the exception of retail. Of the sectors that saw an expansion in vacancies, nursing/medical/care posted the strongest growth and hotel & catering the weakest.
Nursing/medical/care also topped the rankings of temporary staff demand in January. Accounting/financial and secretarial/clerical completed the top three in the league table. The only employment category to see reduced demand was retail.
Neil Carberry, chief executive of the REC, said January’s recruitment activity suggests that speculation about a shallower economic downturn may be justified.
“While permanent placements dropped for the fourth straight month, the pace of contraction slowed and temporary billings growth accelerated again,” he said.
“The need to address the fundamental challenges our labour market faces has not changed with the turning of the year. From skills to tackling economic inactivity, and from immigration to childcare there is much that can be done in partnership with business to help our economy grow and workers to prosper. Ahead of the Budget, the Chancellor should put the people stuff first across the whole of government. Every department has a role to play in getting growth going — and that starts with enabling our labour market.”
