Fears grow of deteriorating jobs market after recruitment firms update on 2023
Signs of stress are emerging in the jobs market after three of the UK’s largest recruitment firms reported significant slowdowns in hiring in the final quarter of last year.
On Monday morning Pagegroup became the third recruitment firm this year to reveal the impact that a slowing jobs market has had on its performance.
The firm reported that profit in the UK was down 20 per cent in the final quarter of the year as it warned profit for the full year would come in below market expectations.
This followed a profit warning from fellow recruiter Hays last week. Robert Walters meanwhile maintained its guidance for the full year despite reporting a drop in revenue.
Pagegroup’s boss, Nicholas Kirk, warned that there had been a “deterioration in job flow through Q4” with the UK in particular performing poorly. Clients were “deferring hiring decisions,” the firm said, while candidates had become “increasingly cautious about accepting offers”.
With all three recruiters publishing updates for the final quarter, analysts are growing about the signals this may be sending about the UK labour market.
“The jobs market may be finally showing some weakness, some two years after the first round of central bank rate hikes,” AJ Bell’s investment director Russ Mould commented.
The UK’s labour market has remained relatively resilient over the past year, despite the most aggressive bout of monetary tightening since the 1980s. Unemployment has only hit 4.3 per cent, up from four per at the end of 2021.
The Bank’s rate hikes, however, have helped reduce vacancies, which measures demand for labour. The vacancies-to-unemployment ratio is down from a peak of 1.1 to around 0.7 now, which has likely impacted recruiters.
The updates from the trio of firms also reinforces the snapshot given by the KPMG and REC survey on jobs, which showed that the pool of labour continued to “rise sharply” in December.
The survey noted that firms were reluctant to take on new staff members while redundancies continued to rise. Indeed, all three recruitment firms cut headcount over the final quarter of the year.
In addition, Dirk Hahn, chief executive of Hays, noted that demand for temporary roles remained stronger than permanent roles, traditionally a sign of low corporate confidence.
“We expect near-term market conditions to remain challenging,” he said.
Although there is no doubt that the labour market is starting to loosen, experts pointed out that it remained very tight in historical terms.
“The labour market weakened across 2023, especially for permanent roles,” Kate Shoesmith, deputy CEO of the Recruitment and Employment Confederation told City A.M. “But it did so from a very high base.”
“It is important to remember that activity levels overall remain relatively high by comparison to pre-pandemic norms, and unemployment is low,” she continued.