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REC/KPMG Report on Jobs: Permanent placements rise at slowest rate in two-and-a-half years

Key points:

◾Growth of both permanent placements and temp billings moderates

◾Downturn in candidate availability eases, but remains marked

◾Slower increases in permanent salaries and temp pay

Summary:

The Recruitment and Employment Confederation (REC) and KPMG Report on Jobs – published today – provides the most comprehensive guide to the UK labour market, drawing on original survey data provided by recruitment consultancies.

Growth of staff appointments eases further…

Permanent placements continued to rise in September. However, the rate of expansion eased to a two-and-a-half year low. Similarly, temporary/contract staff billings increased at the weakest pace in the current 29-month period of growth.

…reflecting slower rise in vacancies

Although overall demand for staff continued to increase in September, the rate of growth eased to a 26-month low. Slower rates of expansion were signalled for both permanent and temporary vacancies.

Salary growth cools…

Starting salaries for people placed in permanent roles continued to increase in September. Although easing to a 20-month low, the rate of growth remained strong. Temporary/contract staff pay growth meanwhile eased to an 18-month low.

…amid slower drop in candidate availability

The availability of staff to fill permanent job roles fell further in September. The rate of decline eased to the slowest in three months, but remained marked overall. Temporary/contract staff availability also deteriorated at a slightly slower pace.

Regional and sector variation

The strongest rise in permanent placements was recorded by Midlands-based consultancies, while the only decline was signalled by those based in London.

The Midlands posted the fastest growth of short-term appointments, while the slowest rise was indicated in the South.

Demand remained much stronger in the private sector than the public sector, with private sector permanent staff recording the fastest growth overall. Public sector permanent staff saw a slight decline in demand for their services.

Accounting/Financial led a broad-based expansion of demand for permanent staff during September, ahead of Nursing/Medical/Care and Construction. The slowest growth was signalled for Blue Collar and Hotel & Catering employees.

Nursing/Medical/Care was the most in-demand category for temp workers in the latest survey period. Each of the other categories also registered increased vacancies. The slowest growth was signalled for Executive/Professional staff.

Comments:

REC chief executive Kevin Green, says:

“As politicians make their big pitches to workers and to business at the party conferences, the UK jobs market is entering a new phase.

“Talent shortages are making it increasingly difficult for employers to find quality candidates. This is now at a critical stage in the construction and engineering sectors, constituting a major threat to planned rail upgrades and housebuilding projects.

“The planned introduction of the National Living Wage is causing businesses to consider alternatives to hiring more staff and this could lead to greater automation in some sectors. This might have a positive impact on UK productivity, but it could also put the brakes on employment growth.

“Salaries are growing rapidly in the private sector as employers compete for talent. This too will have an impact on the amount of jobs businesses can create.

“It’s imperative that the government recognises these issues. We need a renewed focus on skills and progression to create a better supply of talented candidates in the long term. Meanwhile, we need the government to help businesses bring in talent from abroad.”

Bernard Brown, Partner at KPMG, comments:

“The pool of available skilled labour shrank yet further in September, dampening growth of both permanent and temporary placements. This relentless tightening of the labour market continues to push pay up in the private sector, and weekly earnings jumped by 3.4% year on year. While welcomed by workers, this uplift in pay could put downward pressure on firms’ profitability, unless labour productivity improves enough to compensate businesses for the higher wages now on offer.

“Meanwhile activity in the public sector tells a very different story, with demand for staff declining and pay increases falling to an austere 1%. With further cuts planned this is a workforce that needs substantial investment in training and development to help its staff take on their new and evolving remits.”

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