KPMG and REC UK Report on Jobs shows the Decline in Permanent Staff Appointments is Easing

Total vacancies have fallen for the first time since February 2021 according to a recent jobs report by KPMG and the REC, which recorded 989,000 open roles, down by 64,000 since the three months to May, and dropping below the one million mark for the first time in more than two years.

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But the report also suggested that the decline in permanent staff appointments is easing, and that the market is reaching the bottom of a year-long slowdown.

Hesitancy to commit to new permanent hires

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While employers and recruitment agencies taking part in the survey signalled a hesitance among businesses to commit to new permanent hires due to economic uncertainty and budget constraints, a preference for short-term staff is indicated in a fresh rise in temporary billings at the end of the third quarter.  

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This hesitancy has been borne out by figures that show an easing in overall pay growth, starting salary inflation edging to a two and a half year low, and temporary wages increasing at the slowest rate in 31 months.  

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In the light of vacancies falling, and statistics suggesting that the overall availability of candidates improved in September, as well as a continuing skills shortage in certain sectors, recruitment agencies have challenges to face in continuing to meet the needs of both clients and candidates.

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The key findings of the report were:

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1. Downturn in permanent places moderates – the rate of reduction eased from August’s 38-month record, but there are frequent reports of hesitancy in hiring and recruitment freezes due to rising costs. Skill shortages also contributed to difficulties in filling vacancies.

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2. Temporary billings expand at the quickest rate for five months – billings from the recruitment of temporary workers increased at the end of the third quarter, suggesting a demand for short-term staff who offer flexibility over permanent appointments.

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3. Overall demand for staff falls slightly – the Total Vacancies Index was just below the neutral 5.0 level at 49.2 in September, the first reduction in the overall demand for workers since February 2021, albeit very slight.

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4. Candidate supply expands at a slower rate – the Total Staff Availability Index was at 55.5 – above the 50.0 neutral threshold, a seventh successive monthly increase in available candidates. Permanent staff availability increases were often reported as being linked to companies restructuring workforces or people seeking hybrid working opportunities. Temporary supply continued to expand rapidly, underpinned by market conditions and company layoffs.

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5. Permanent pay growth slips – the rate of starting salary inflation continue to moderate. Where higher starting salaries were offered, it was often in response to the increasing competition for skilled workers. Temporary wages saw their softest increase for 31 months, with recruiters reporting that employers were having to offering higher pay to attract and secure candidates.

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6. Permanent vacancies increased in five of the ten broad employment categories during September, led by Hotel & Catering and Engineering. The steepest reductions were seen in Retail and Construction.

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7. Retail and Construction, along with Executive/Professional were the steepest drops in the temporary sector, where Nursing/Medical/Care, Hotel & Catering and Secretarial/Clerical saw the strongest rises in vacancies.

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Comments from KPMG UK

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Claire Warnes, Partner, Skills and Productivity at KPMG UK, said: “A concerning feature of this month’s data is that demand for staff is losing momentum, with total vacancies falling for the first time since February 2021 amid a fresh reduction in permanent vacancies.

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“While both reductions are slight, employers are clearly nervous due to the long-term economic uncertainty and budget constraints that are impacting businesses everywhere. This in turn is leading to a continued reliance on temporary staff.

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“The labour market is starting to look slightly precarious again and recruiters will be wondering and hoping that the recent slight calming of inflation rates positively impacts the outlook for both employers and jobseekers.”

Comments from REC

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REC Chief Executive Neil Carberry, said: “Employers tell us they are feeling better about themselves as the year moves on, and the data does suggest the possibility of a turnaround in hiring over the next few months. Permanent placements have been falling for a year now from abnormal post-pandemic highs. While permanent hiring activity continues to slow, fewer firms reported a slowdown last month, leading to a much shallower rate of decline than most months recently. Likewise, temporary hiring remains robust with billings growing marginally in September – as they have most months this year.

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“This feels like a market that is finding the bottom of a year-long slowdown. And the relative buoyancy of the private sector is likely to be driving this more positive outlook. Some sectors such as hospitality, engineering, logistics and healthcare continue to experience very strong and growing demand. Along with high inflation, this is likely to be contributing to the growth of pay for temps and perms alike.

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“As we move towards the Autumn Statement, action to help people find high-quality roles is essential as the picture varies so widely from sector to sector. The REC would like to see a focus on skills, finally reforming the system to deliver a mix of high-quality courses within the levy framework, and action to tackle inactivity – like extending the Restart programme which has helped recruiters place thousands of long-term unemployed people into work. Both of these could form part of a long-overdue people and growth strategy.  

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From reforming government procurement to better and more effective regulation, there is a lot government could do in partnership with recruiters to drive growth and prosperity.”