Number of job seekers spike as high taxes continue to hurt UK economy
The number of job seekers has spiked while a rise in starting salaries was “fractional”, according to analysis of leading survey data, in signs the jobs market is struggling to shake off higher taxes and low growth prospects.
New monthly findings by the Recruitment and Employment Confederation (REC) and KPMG have pointed to another rise in people out of work and looking to be hired, which is likely to be driven by high levels of redundancies and non-replacement of staff at various firms.
Using S&P Global’s purchasing managers’ index data for September, a key survey that tracks growth across the UK economy, REC and KPMG researchers found that the jobs market has “not yet turned a corner and remains tough”.
It represents the latest damning set of data on Chancellor Rachel Reeves’ handling of the UK economy nearly a year after she delivered her first Autumn Budget in which she raised taxes on jobs by £20bn through hiking employers’ national insurance contributions (NICs).
Industry analysts said the upturn in temporary candidates was the second steepest since November 2020 while the rate of growth in the permanent jobseekers’ pool was the third highest monthly rise in the same time frame.
The new report also found that the permanent placements index was 44.8, which still stood well below the 50-figure mark for neutrality.
There was a steeper decline in public sector vacancies than in private sector vacancies across both permanent and temporary work.
London also experienced a more concerning drop, with permanent placements in the capital falling by the quickest pace since August 2020 in the immediate aftermath of the first lockdown.
The Office for National Statistics revealed last month that the number of job postings available in the labour market in August had reached 728,000, one of the lowest recorded figures since spring 2021.
Job postings decline
REC and KPMG said the downturn in available jobs was the softest decline seen for a year though it is unlikely to come as a relief for the government or the Bank of England, which are weighing up the effects of a weakened jobs market for the future path of inflation.
The biggest drops on the month came in the retail, hotel and catering, and professional sectors – a worrying sign for both low and high income workers.
The survey data also showed that the rate of growth in starting salaries “rose negligibly” in September due to a weaker demand for workers and smaller hiring budgets.
Temporary pay growth also eased to an eight-month low while starting salaries fell in some regions including the South of England.
Jon Holt, group chief executive at KPMG, said: “With very little positive news out there on the economy in recent months, and lots of speculation about the Budget, it is understandable that employers are cautious with their hiring
“The jobs market has not yet turned a corner and remains tough, but we saw stabilisation in some of the numbers last month. While the public finances provide little room for manoeuvre in November, some clear signals from the Chancellor that build on business confidence will hopefully support renewed hiring as we head into 2026.”
REC’s Neil Carberry urged the government to find “practicality” on the Employment Rights Bill to ease concerns for employers while tax rises on businesses at the Budget would be “unaffordable”.