Permanent placements fall again, but at slower rate

Pay rates continue to rise markedly

Worker availability increases to steeper degree

Commenting on the latest survey results, Jon Holt, Chief Executive and Senior Partner of KPMG in the UK, said: “We know our labour market is resilient. The big picture is that unemployment is historically low with the ease of filling vacancies back to pre- pandemic levels. Taken together with today’s data and expected interest rate cuts, inflation easing and increased consumer confidence over the summer, we will hopefully move towards a better economic outlook for the second half of 2024. “But May’s data underscores the complexities in the current labour market. While demand overall remains weak due to firms still stalling on hiring decisions, the pace of decline has slowed for the third month in a row. Some sectors even saw demand growth – although a lack of skilled applicants could put further upward pressure on pay as employers compete to attract the best talent. “Business confidence is ready to bounce back. And as well as counting on a more dovish Bank of England, ahead of the General Election CEOs will be closely following all parties’ policy commitments as they consider their plans for future growth.” Neil Carberry, REC Chief Executive, said: “The jobs market looks like it’s on its way back, with clear improvements over last month on most key measures, especially in the North and Midlands. While permanent hiring remains weak, these are the best numbers we have seen in more than a year, and the temp billings number has also improved. “There is potential energy stored in the economy, as employers are feeling more confident. Political certainty and falling interest rates should add to lower inflation and help this turn into movement over the course of the rest of the year. REC members report that clients are ready to hire, but hesitant. These numbers suggest that caution may be starting to abate. “Pay growth remains steady, reflecting both settlements made by employers for their staff, but also the substantial National Minimum Wage rise in April. “No attempt to drive growth will succeed without the next government addressing people issues within its first 100 days. This must include reform of the Apprenticeship Levy to cover high- quality, modular training, and a long-term cross- departmental strategy to tackle labour and skills shortages, owned by the Cabinet Office but delivered locally. As the specialists in jobs, recruiters are ready to help, whoever wins on July4.”

Executive summary 

The Report on Jobs is unique in providing the most comprehensive guide to the UK labour market, drawing on original survey data provided by recruitment consultancies and employers to provide the first indication each month of labour market trends.
The main findings for May are:

May sees weaker decline in placements
Permanent staff appointments continued to fall in May, according to the latest survey of UK recruitment consultants. It was the twentieth successive month in which placements have fallen, but the latest decline was modest and the slowest since March 2023. A similar trend was seen for temp billings, with the latest contraction the weakest in four months. There were reports that slow decision-making, a lack of vacancies and specific candidate shortages weighed on placements.

Further uplift in pay rates
Amid reports of a competitive market landscape, alongside evidence of a ripple impact on base pay rates following April’s increases in the national minimum and living wages, typical starting pay for candidates rose again during May. For permanent workers, salaries were reported to have increased markedly and to only a slightly lesser extent than April’s four-month high. Temp staff saw a similar trend, with pay rising at only a slightly slower pace than in the previous month.

Staff vacancies down only slightly
Although demand for staff continued to fall in May, extending the current downturn to seven months, it did so only marginally and to the lowest degree in this sequence. Moreover, the latest fall was exclusively led by permanent workers as temp staff demand was unchanged in the latest survey period.

Staff availability rises to greatest degree since end of 2020
May’s survey revealed another steep increase in staff availability. The rate of growth was the steepest recorded by the survey since December 2020. The faster expansion in the number of people looking for work was seen for permanent job roles. Panellists noted that a mixture of redundancies, higher unemployment and reduced demand for staff led to the broad rise in candidate availability.

Staff Appointments

Recruitment consultancies report on the number of people placed in permanent jobs each month, and their revenues (billings) received from placing people in temporary or contract positions at employers. An index reading above 50 signals a higher number of placements/billings than the previous month. Readings below 50 signal.

Modest reduction in permanent placements

Permanent placements made by UK recruitment consultants fell again in May, extending the downward trend that began in October 2022. That said, the rate of contraction was modest and the softest in over a year, as signalled by the seasonally adjusted Permanent Placements Index reaching a 14-month high in May. Anecdotal evidence from the survey panel pointed to fewer job openings at clients amid a lack of
available roles. There was also evidence of delayed hiring decisions. Some panellists continued to report a lack of suitable candidates for available positions. There was a steep reduction in the number of permanent placements in the South of England. However, a return to marginal
growth was seen in the Midlands.

Temp billings fall at slower pace

The seasonally adjusted Temp Billings Index remained below the crucial 50.0 no-change mark for a seventh successive month in May.
However, a rise in the index pointed to a slower and more modest fall in temp billings. Where there was a decline, this was linked by panellists to a mixture of reduced demand and candidate shortages for specific roles. Two English regions recorded a drop in temp billings (London and the South of England). In contrast, solid growth was seen in the Midlands and the North of England.

Vacancies

Recruitment consultants are asked to specify whether the demand for staff from employers has changed on the previous month, thereby providing an indicator of the number of job vacancies.

Slight fall in demand for staff

The seasonally adjusted Total Vacancies Index remained below the crucial 50.0 no- change mark in May to signal a fall in overall demand for staff for a seventh successive month. However, with the index rising to 49.7, from 48.3 in April, the rate of contraction was marginal and the slowest in this sequence.

Permanent & temporary vacancies

Latest data showed that permanent staff vacancies continued to fall in May, extending the current downturn to nine months. However, the rate of contraction was marginal, and the weakest recorded by the survey since last October. Meanwhile, temp worker demand was unchanged in May
following a three-month period of falling temp vacancies.

Public & private sector vacancies

There were concurrent increases in private sector vacancies for both permanent and temporary workers during May. The rate of
growth for permanent staff was solid and the strongest for a year. This contrasted with only a marginal rise for temp workers. For public sector workers, demand continued to fall for both permanent and temporary staff. The steeper contraction was again for permanent workers. In the case of temp staff, the reduction was only marginal and the weakest in the current three-month sequence of declining vacancies.

Vacancies by sector

Recruitment consultancies are requested to compare the demand for staff according to sector with the situation one month ago.

Permanent vacancies

Of the ten broad sectors covered by the survey, just three recorded growth. The strongest increase was seen for Engineering, followed by Blue Collar. The steepest drops in demand for permanent workers were seen for Retail and Secretarial/Clerical.

Temporary vacancies

Temporary staff demand rose for half of the ten broad sectors in May. The strongest growth was for Engineering followed by Blue Collar. Where vacancies fell, the most prominent decline was again seen for Retail.

Staff availability

Recruitment consultants are asked to report whether availability of permanent and temporary staffhas changed on the previous month. An overall indicator of staff availability is also calculated.

Candidate supply rises to strongest degree since end of 2020

The availability of staff increased sharply during May and for the fifteenth successive month. The rate of growth was also the steepest recorded
by the survey since December 2020. This was signalled by the seasonally adjusted Total Staff Availability Index which rose to 62.2 in May, up
from 60.4 in the previous month. Permanent staff availability rose in May to a steeper degree than for temporary workers.

Steep expansion in permanent staff availability

Permanent staff availability continued to improve during May, extending the current period of expansion to 15 months. Moreover,
the rate of growth was the highest since the end of 2020. Panellists reported that a mixture of redundancies, reduced demand and less
vacancies had led to the latest rise in candidate availability. By English region, the strongest rises in permanent staff availability were seen in the
South and North. The slowest increase was in London, but even here the rate of growth was still steep.

Temp staff availability continues to rise steeply

The availability of temporary staff increased again in May in line with the trend since March 2023. The rate of expansion was steep, though softened  little since April’s recent high. There were reports from panellists that redundancies and higher unemployment, alongside a general drop in demand for candidates, had driven growth in temp candidate supply. There was some divergence in growth rates by English region. Whereas a steep and accelerated rise was seen in the South of England, the Midlands recorded a relatively modest increase in temp staff availability.

Demand for skills

Recruitment consultancies are invited to specify any areas in which they have encountered skill shortages during the latest month.

Pay pressures

The recruitment industry survey tracks both the average salaries awarded to people placed in permanent jobs each month, as well as average hourly rates of pay for temp/contract staff.

Marked increase in starting salaries during May

May’s survey showed that permanent starting salaries increased again, marking a thirty-ninth successive monthly upturn. The degree to
which salaries rose was again marked and little changed on April’s four-month high. Panellists commented that wages continued to rise in
line with broader inflationary pressures and the high cost of living. Some panellists noted that salaries were being raised in response to April’s increase in the national minimum wage. In England, the steepest increase in permanent salaries was seen in the North and the slowest
in the South.

Temporary wage inflation remains high

Temporary pay continued to rise at a similarly marked pace to starting salaries during May. Wage inflation has now been registered in
each month since March 2021. Panellists noted the inflationary impact of April’s national minimum and living wage increases, which in some instances were reported to have lifted broader pay levels. Firms were also reported to be willing to bolster pay to attract high quality candidates. As with permanent workers, the steepest rise in temp pay was generally found in the North of England, with the weakest seen in the South.