Pay rates improve and recruitment declines at slowest pace this year

Recruitment rates continue to reflect a cautious hiring outlook in the UK, but a slower decline in hiring and improved pay growth shows signs of a steadier market, according to a monthly report by KPMG and the REC.
June 10, 2024
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Employers continue to hold back on hiring in the UK, but the rate of contraction in April was the slowest recorded since January, suggesting a potential turnaround in demand, according to the UK Report on Jobs from KPMG and the Recruitment and Employment Confederation (REC).

“[Permanent staff appointments] have now fallen in each month since October 2022, although the rate of decline in April was noticeably slower, easing to its weakest since June 2023,” the report said.

Temporary billings also fell at a softer rate (the weakest in three months). Panellists noted continued hesitancy among companies in recruiting extra staff plus a lack of suitable candidates.

“Ongoing weak demand is driving the steady decline in permanent staff appointments month on month, and we’ve seen a sharp uptick in candidate availability,” said Jon Holt, chief executive and senior partner at KPMG in the UK.

The latest data signalled another sharp increase in candidate numbers during April, with the rate of growth accelerating to the steepest recorded by the survey since last November, the report said. The Total Staff Availability Index improved to 60.4, up from 60.2 in March, with growth registered for 14 months in a row. Permanent and temporary candidate supply, the report said, increased at similarly sharp rates in April.

Pay rates also improved last month as companies scrambled to attract suitable candidates, with wage growth on the rise for both permanent and temporary staff for 38 months in a row.

Temporary staff saw their pay rates rise at the steepest pace since June 2023 and to a degree that was slightly above average, the report said. For permanent staff, the rate of growth accelerated to its highest in the year to date, though it remained below its historical survey trend.

While general demand is low across sectors, some employers are increasing pay to attract talent, the report noted. Outside of the usual seasonal impacts, panellists commented that competition for a “short supply” of quality candidates had led to upward pressure on starting salaries.

Despite complexities from last month’s 9.8% rise in the National Living Wage “overall pressure is easing on the labour market”, Holt said in the report. “Business leaders see this cooling, combined with weakening inflationary pressure, as indicators for the [Bank of England’s Monetary Policy Committee] to hopefully shift to a more dovish position. Companies would then have the confidence and certainty to press go on their investment strategies.”

Neil Carberry, the REC’s chief executive, said that lower inflation and the prospect of lower interest rates could stabilise the labour market in the UK.

“The critical moment in any labour market slowdown is the point at which demand starts to turn around,” Carberry said in the report. “Today’s hiring data suggests that point is close, with fewer recruitment firms reporting a drop in demand; firms have told us all year that they will be willing to hire and invest in their business when confidence returns to the wider economy.”

Original Article: FM

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