UK jobs market cools as pay growth eases and redundancies surge while supply of workers rises

The UK job market is showing signs of cooling as wage growth slowed last month and UK companies laid off staff or waited to hire new workers.

Wages for both permanent and temporary workers rose in June at the slowest pace in more than two years, according to the latest labor market survey from the Recruitment and Employment Confederation (REC) and KPMG.

While wage pressures remained ‘excellent’, slower wage growth could signal a decline in headline inflation, which in turn could lead the Bank of England to be more cautious about further rate hikes.

Wage growth has been cited by the BoE and Governor Andrew Bailey as a major driver of inflation.

Hiring of permanent staff also slowed sharply in June as uncertainty about the economic outlook continued to weigh on hiring decisions.

Companies instead showed a preference for hiring temporary staff, which grew modestly.

Inflation has forced companies to cut jobs and halt hiring.

Last week, recruitment firm Robert Walters warned that the economic turmoil was weighing on candidate and client confidence as it reported that its UK division took a hit amid layoffs in the technology sector and volatility in the financial services sector.

The slowdown in hiring and layoffs at companies impacted staff availability, with the number of candidates looking for a job increasing for the fourth consecutive month.

And according to the study, the supply of both temporary and full-time workers increased at the fastest rate since December 2020.

Claire Warnes of KPMG UK said: ‘The sharp rise in candidate availability this month […] is a major concern for the economy due to the effects of a continued slowdown in hiring and increasing layoffs in many sectors.

Neil Carberry, REC’s CEO, added that this was also likely “driven by people reacting to high inflation by looking for jobs faster, and by some companies reshaping their businesses during a period of low growth.”

“It is therefore no surprise that the rate of wage growth has slowed again,” he said.

The REC and KPMG permanent placement index showed a reading of 46.4, indicating a slowdown in hiring, although the rate of contraction slowed from the nearly two-and-a-half-year record May.

The study, which uses data from around 400 recruitment and employment consultancy firms, found that the number of permanent placements fell in all four regions of England, with the exception of the north of England.

However, demand for workers continued to rise in both the private and public sectors, with the exception of permanent jobs in the private sector.

Demand for temporary workers increased in June in most sectors, especially from hospitality companies.

“There are still major skills shortages, with accounting, construction, education and nursing sectors struggling to find and retain workers,” Carberry said.

‘This while the supply of candidates on the labor market has been rising for four months in a row.’

Warnes said this was the result of a “clear mismatch between open positions and the skills of available candidates.”