REC: Report on Jobs: Hiring slows in September amid weaker economic outlook and candidate shortages

Key findings

• Weakest rises in perm placements and temp billings for 19 months

• Vacancies expand at slowest rate since February 2021

• Candidate shortages and cost of living pushes up rates of pay

Data collected September 12-26

Summary

The latest KPMG and REC, UK Report on Jobs survey, compiled by S&P Global, pointed to a further slowdown in recruitment activity across the UK at the end of the third quarter. Permanent staff appointments and temp billings expanded at the weakest rates in over a year-and-a-half, as uncertainty over the outlook and limited staff supply hampered growth.

At the same time, overall vacancy growth continued to ease, with both permanent and temporary staff demand rising at the softest rates since February 2021. The downturn in candidate availability meanwhile abated only slightly, which combined with the rising cost of living drove further steep increases in starting salaries and temp pay.

The report is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 UK recruitment and employment consultancies.

Recruitment activity slips to 19-month low in September

Relatively strong demand for staff and efforts to boost capacity supported a further increase in hiring activity at the end of the third quarter. However, the weaker economic climate and candidate shortages dampened overall growth. Notably, recruiters signalled the slowest increases in permanent staff appointments and temp billings for 19 months, with the former seeing only a mild expansion overall.

Growth of demand for staff weakest since February 2021

Overall vacancy growth softened for the sixth month in a row in September, to mark the slowest rise in demand for staff since February 2021. Weaker increases were signalled for both permanent and temporary vacancies, with the former noting the softer rate of expansion.

Pay pressures ease only slightly

The rising cost of living and competition for scarce workers drove further marked increases in starting pay for both permanent and short-term workers in the latest survey period. This was despite the rate of starting salary inflation moderating further from March's all-time record to a 15-month low. Temp wage growth also edged down to its weakest since June 2021.

Candidate supply continues to fall at historically sharp pace

Although there were further signs of the downturn in labour supply easing in September, candidate numbers continued to fall sharply overall. Permanent staff availability deteriorated at a quicker pace than that seen for temp workers. A key factor weighing on candidate numbers was a greater hesitancy among people to apply for new roles, driven by fears over the economic outlook. A generally low unemployment rate, skills shortages and Brexit also weighed on candidate availability.

Regional and Sector Variations

Data split by region showed that London registered the steepest increase in permanent staff appointments. Upturns were relatively mild in the North of England and the Midlands, while the South of England saw the first reduction in 19 months.

Billings expanded at a softer rate in London and the South of England, but at a quicker rate in the North of England. The Midlands meanwhile registered a decline in temp billings for the first time in 27 months, albeit one that was modest overall.

The steepest increase in demand for staff was seen for temporary workers in the private sector during September. The softest expansion was meanwhile seen for permanent vacancies in the public sector. Notably, growth of demand slowed across all categories with the exception of temporary staff in the public sector.

Growth of demand for permanent staff softened across nine of the ten monitored job categories in September, with Retail the sole exception. The strongest increase in permanent vacancies was signalled for Nursing/Medical/Care, while the weakest was seen for Construction.

Secretarial/Clerical saw the quickest rise in temporary vacancies during September, and was one of the two categories which did not register slower growth compared to August. Executive/Professional meanwhile saw the slowest increase in temp staff demand.

Comments

Commenting on the latest survey results, Neil Carberry, Chief Executive of the REC, said:

“The challenges we see in today’s data reflects the underlying shortage of Labour the UK faces. With unemployment at record lows, pay continues to rise for both temporary and permanent workers starting new jobs, and activity levels across the recruitment and staffing industry remain high. While any economic slowdown this winter will affect the market, the extent of shortages mean that hiring will remain a focus for employers.

“The REC has shown that failing to address these issues could cost our economy massively in the years to come. While there is much that Government can do, like reforming the failed Apprenticeship Levy, a lot of the answers lie with hiring businesses. Firms need to work with skilled recruiters on offers that will maximise the skill base we have. There has never been a more important time for business leaders to put the people stuff first.”

Claire Warnes, Head of Education, Skills and Productivity at KPMG UK,

"The UK jobs market remained tight in September, with candidate shortages impacting recruiters’ abilities to fill jobs. Deepening economic uncertainty has also meant that workers are choosing to stay put in current roles, rather than apply for new roles, leading to a moderation in the overall rate of vacancy growth. Some employers, even those who anticipate that the recession may be short, are taking steps now to contain costs, including hiring freezes. Those employers who continue to invest in their workforce, particularly upskilling, may find they weather the recession better and will be in a stronger position to benefit from the upturn as and when it comes.”