Increasing signs of slack in UK’s labour market as firms report growing pool of workers
Signs of weakness are starting to show in the UK’s labour market with starting salary inflation easing and the pool of available labour growing.
According to KPMG and REC’s UK report on jobs, the availability of candidates increased for the eighth straight month in October, and at a much sharper rate than September.
The survey reported that the availability of labour had risen due to “redundancies and restructuring efforts” at firms surveyed.
The increase in labour availability fed through into lower starting salary inflation, which slipped to a 31-month low – although it remained at elevated levels.
“Recruiters often mentioned that employers had to up pay offers to secure suitably-skilled staff to reflect the higher cost of living,” the survey noted.
“Although the rate of pay growth has now returned to more normal parameters, it is still strong, especially in sectors were staff remain in short supply”, Neil Carberry, chief executive of the Recruitment and Employment Confederation (REC), said.
Claire Warnes, partner, skills and productivity at KPMG UK said the jobs market was facing “a cyclical challenge”.
“There are people out there who want to work, and there’s a decent availability of candidates, but they often do not have the right skills for the roles on offer. This means higher starting salaries are being offered as businesses compete in the ongoing battle for talent,” Warnes continued.
Reflecting the uncertain economic outlook, recruitment activity in October declined for the thirteenth successive month. Permanent placements fell, although at the weakest extent in four months.
Temporary billings rose slightly as firms looked for greater flexibility in their workforce.
Economists will be paying close attention to survey data for indications of how the Bank of England’s interest rate hikes have been affecting the economy.
Policymakers have stressed that developments in the labour market are crucial for determining whether monetary tightening has gone far enough, but have also been sceptical of the official data.
MPC members noted that the Office for National Statistics (ONS) figures were difficult to reconcile with other estimates, with chief economist Huw Pill suggesting figures were “increasingly an outlier” in estimates for wage growth.