The UK’s job market is experiencing a significant cooling, with major employers reporting a slowdown in wage growth and a decline in job vacancies in July.
This marks a continuation of an almost two-year downturn in demand for permanent staff.
A survey conducted by the Recruitment and Employment Confederation (REC) and accountancy firm KPMG revealed a net decrease in permanent job placements last month. Large employers have been making more redundancies and hiring fewer new starters, contributing to the downturn.
The survey, which included 400 recruitment and employment consultancies closely monitored by the Bank of England, also indicated a slowdown in wage growth. While companies continued to raise pay rates to attract suitable candidates, wage growth in July was slightly lower than in June and below the monthly trend.
Last week, the Bank of England cut interest rates for the first time in over four years, following a reduction in inflation to the 2 percent target in May and June. The Bank has stated it is monitoring for further signs of a cooling job market, slower wage growth, and a decrease in service sector price rises before considering another rate cut.
Inflation to fall further
Despite resilient wage settlements and service sector price increases likely to push headline inflation above the 2 percent target in the coming months, the Bank projects inflation will fall to about 1.7 percent in two years and 1.5 percent by 2027. Financial markets expect the central bank to maintain interest rates at 5 percent at the next policy meeting on 19 September, with potential cuts resuming in November. Predictions suggest the base rate could drop to around 3.5 percent by the end of next year.
The latest REC/KPMG jobs report, compiled by S&P Global, shows a decline in vacancies in July and subdued hiring demand. There was also a marginal reduction in temporary billings.
The report noted that recruiters were increasing pay to attract workers amid a “dearth of suitable candidates,” but wage inflation, though high relative to recent years, had slowed from the previous month. Temporary pay also saw only a marginal increase, marking the weakest rate in nearly three and a half years.
Kate Shoesmith, the deputy chief executive of REC, commented, “The weaker growth in both salaries and temp pay suggests that employers are keeping pay in line with inflation, as the Bank of England wants. The interest rate cut is welcome, and employers will need more of the same to maintain confidence.”
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.
