The latest KPMG and REC, UK Report on Jobs survey, compiled by S&P Global has indicated a more cautious approach to staff hiring at the start of 2023 amid ongoing economic uncertainty and cost pressures. There was a further fall in permanent staff hires, while temp billings increased modestly. Recruitment efforts were also dampened by ongoing candidate shortages, though there were further signs of the downturn in labour supply easing in January.
More encouragingly, overall vacancy growth picked up for the first time in nine months. The uptick remained slower than the survey’s average, however. Nevertheless, pay pressures remained historically strong, as firms responded to greater competition for staff and the rising cost of living by increasing salaries and wages.
Lingering uncertainty over the economic outlook and hesitancy to commit to new permanent hires weighed on recruitment activity at the start of 2023. Permanent staff appointments fell for the fourth month in a row, albeit at the slowest rate over this period. Firms instead often leaned on temporary workers to fill vacancies. Consequently, temp billings rose at the quickest rate since last September, albeit mildly overall.
Recruiters signalled a stronger increase in demand for staff during January, with overall vacancies expanding at the quickest rate for three months. That said, 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 all-time record, 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.
“January saw permanent vacancies rise at a quicker pace for the first time in nine months, with the rate of demand growth the strongest seen since last October, giving recruiters, employers and job hunters a reason to be cautiously optimistic for the year ahead,” commented Claire Warnes, Partner, Skills and Productivity at KPMG UK. “But, with the cost of living continuing to place upwards pressure on pay, job security causing low candidate supply and employers relying on temporary staff as permanent placements decline again, the jobs market remains volatile.
“Recruiters and employers should be thinking creatively about how to attract and retain permanent hires to bring about stability, including by taking on more apprentices across a range of age groups, and investing in upskilling and reskilling their existing staff.”
Neil Carberry, Chief Executive of the REC, added: “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. The temp market had its fastest month of growth since last September. Taking into account the high level of activity last summer and autumn, when the permanent slowdown started, activity levels for both permanent and temporary roles are still high – something which is reflected both in this survey and in feedback from REC members.
“The need to address the fundamental challenges our labour market faces has not changed with the turning of the year,” he added. “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.”
