Permanent hiring in the UK moved closer to stabilisation in February, with the decline in placements slowing to its weakest pace in almost three years, according to the latest figures.
The latest KPMG and REC UK Report on Jobs found that demand for staff continued to fall but at the slowest rate in nine months, suggesting the prolonged cooling of the labour market may be beginning to ease.
At the same time, increases in pay slowed and the number of jobseekers rose sharply, indicating employers may now have a larger pool of candidates to choose from.
Permanent hiring shows tentative improvement
Recruiters reported that permanent staff appointments fell only marginally in February, marking the weakest decline since March 2023.
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Some recruitment consultancies said hiring conditions remained subdued due to economic uncertainty and high staffing costs. Others reported a gradual improvement in companies’ willingness to fill vacancies.
Temporary billings, which measure revenues earned by recruitment firms from placing temporary workers, also declined in February after a modest increase at the start of the year.
Job vacancies continued to decline during February, extending a run of falling demand that has now lasted more than two years. But the contraction eased to the slowest pace since May last year, reflecting a smaller fall in permanent job openings.
Demand for temporary workers fell slightly faster, though the overall decline remained moderate.
The survey’s vacancy index rose from 43.8 in January to 45.8 in February, still below the neutral 50 mark that signals growth but pointing to a slower pace of contraction.
Figures from the Office for National Statistics also show the number of job vacancies has remained broadly stable recently but remains well below earlier levels. In the three months to January there were around 726,000 vacancies across the UK, about 8.7 percent lower than before the pandemic.
Candidate numbers rise as redundancies increase
The number of people seeking work rose sharply in February, with recruiters reporting a faster increase in candidate availability compared with January. Permanent candidate numbers increased for the third consecutive year, with many recruiters linking the rise to redundancies and cost cutting by businesses.
The supply of temporary workers also continued to increase, though the rate of growth slowed to its weakest level for more than a year.
Starting salaries and temporary pay rates both continued to rise in February, extending a period of pay growth that has lasted several years. But the pace of wage increases eased compared with January.
Permanent salary growth slowed to the weakest rate since October, while temporary pay increases were modest overall. Recruiters reported that competition for specialist skills continued to push wages higher in some areas, but a larger supply of candidates was limiting broader pay pressures.
Regional and sector differences
The survey also revealed differences across regions and sectors. Permanent placements fell in London and the South of England but rose in the North. Meanwhile, the Midlands recorded its first decline in permanent placements for three months.
Engineering was the only sector to see stronger demand for permanent staff during February. Retail and hospitality recorded the sharpest reductions in vacancies.
Demand for temporary workers fell across most sectors, with retail again seeing the steepest drop in vacancies.
Jon Holt, group chief executive and UK senior partner at KPMG, said the labour market was showing early signs of improvement after a prolonged slowdown.
“Despite a marginal fall in hiring last month, the jobs market was showing its strongest signs of improvement in three years, with hiring at its closest point to turning positive,” he said. “However, we need stability for sustained growth, and yet again businesses are facing into unexpected economic shocks because of global events out of their control.
“Resilience is now the new normal, so it is likely we may see these signs of recovery stall again in the near term as chief execs take stock.”
Neil Carberry, chief executive of the Recruitment and Employment Confederation, said the latest figures suggested the worst phase of the hiring slowdown may be ending.
“While February’s report is by no means a source of unalloyed celebration, it does suggest that the worst of the hiring slowdown has passed. There may still be a few bumpy months to come, especially in light of global instability, but the stabilising trend we have seen so far this year has continued.”
Carberry added that stronger business confidence would be needed to deliver sustained growth in hiring and job creation.
