We are midway through the second quarter of 2023 and there’s still plenty of uncertainty over the economic outlook. As has been true for much of the past 18 months, this time of financial uncertainty has created trends within the recruitment sector that remain true in this.
Recruiters from across the UK have reported an ongoing delay in client decision making which has impacted the placement of permanent candidates in particular.
A positive outlook.
However, there is plenty of evidence to suggest that we might see a positive change in employer confidence in the hiring market.
According to the REC Labour Market Tracker, there were 1.7million active job advertisements in the week commencing 17th April. This is +4% from the previous week and +19.5% YoY.
Such high levels of vacancies plus falling rates of economic inactivity suggest we can expect to see a sizeable expansion in the UK workforce as we move further into 2023.
In addition, Bank of England figures reveal that employment growth in Q2 was stronger than expected while levels of unemployment are projected to remain below 4% until the end of 2024.
Employer confidence is set to improve.
Reflecting this positive outlook is the data from the REC Jobs Outlook Survey. This reveals that employers have a growing confidence in both hiring and investment decisions, falling into positive territory for the first time since January 2022. Employers reported a +18 net increase in demand for both permanent and temporary workers.
The recruitment landscape – May 2023.
So, does May’s recruitment activity reflect this positivity and confidence?
Here are the headlines as reported by our recruitment colleagues working across the UK.
Vacancies.
Although still high, there was an easing of job vacancies across both permanent and temporary markets throughout May. Permanent vacancies rose at a pace that was the 2nd slowest since February 2021.
Temporary roles expanded at the weakest rate for 33 months and increased only slightly month on month.
The ONS data supports this. It indicates that in the 3 months to April ’23, total vacancies edged lower. In this period, the number of open roles stood at 1, 083, 000 and was down by 55k compared to the preceding 3-month period. This was the 10th consecutive period where vacancies have been on a decline.
Mirroring this are the YoY figures. Annually, vacancies were down by 16.5%; the quickest reduction since Q1 2021. However, vacancies still top the pre pandemic numbers. In the three months to February 2020, official data tells us that job vacancies across the UK were 826k.
Vacancies – Public vs Private sector.
Both sectors witnessed a growth in the demand for staff. The rates of expansion moderated month on month. The strongest rise was for temporary workers in the public sector, closely followed by permanent vacancies in the private sector. The softest upturn was for temporary staff in the private sector. This did expand, but only marginally.
Vacancies – By sector.
Within the permanent market, 7/10 job sectors recorded an increase in the demand for staff. Retail saw the biggest decline and notably, there were also slight falls within the IT & Computing and Construction sectors.
Looking at the temporary market, vacancy demand expanded in just over 50% of the monitored sectors through Q2. Temporary workers in the Engineering sector were most in demand, while IT & Computing mirrored the permanent market and noted a slight decline.
Demand for Skills.
Within the IT and computing sector, the skills most required within the permanent market were:
- Automation Testers
- Developers
- Software Engineers.
This was somewhat similar to the temporary market.
- Data Engineers
- Developers
- Software Engineers
Were the job titles most in demand here.
At Ignite Digital.
These are all job roles we are searching for at Ignite too. Business development and business intelligence seem to be fuelling our client’s hiring demands. Data roles are abound while developers and QA testers to bring to market intelligence-led products are also in demand.
Candidate Availability.
The good news is that recruiters from across the UK reported a sharp and accelerated rise in overall candidate availability. In fact, they reported the steepest increase in 2 and a half years.
While this was true across both permanent and temporary markets, it was permanent candidate availability that indicated the quicker and increased rates of growth.
Permanent candidate availability.
Permanent candidate availability increased for the 3rd consecutive month in May. Month on month, the rate of growth was the sharpest recorded since the end of 2020. Uncertain economic conditions have caused many companies to restructure. Unsurprisingly this has led to redundancies, and in turn, an influx of professionals into the jobs market.
Recruiters have also reported an increase in the number of candidates who are beginning to regain their confidence. Candidates are beginning to be more willing to move to consider and move to new roles that are better paid.
London led the surge in renewed labour supply, but this was true across the UK.
Temporary candidate availability.
After a slow April, May saw the numbers of temporary candidates rise solidly.
Labour supply increases were visible in each of the last 3 months, but the latest rise was the steepest seen by UK recruiters since February 2021. Anecdotal evidence suggests that this was due to both company layoffs and a lack of work.
The most marked increase was for temporary staff in London and the North of England. But there were fresh upturns for the South and the Midlands.
Pay and salary.
Once again there was a rise in permanent salaries for the 27th consecutive month. Though sharp, the rate of growth was the softest seen in just over 2 years. Once again, this has been attributed to the war for talent and the cost-of-living increases.
The quickest growth was seen in the North of England, and the slowest in London.
Across the temporary markets, there was a sustained rise in hourly rates across May. This brings the current period of inflation to 27 months.
Though it remains high overall, May’s rate of inflation was the softest across this period.
National earnings data.
The ONS data reveals that overall employee earnings (including bonuses) increased by + 5.8% YoY over Q1 2023. Though sharp historically, this was the joint softest rise in pay since May – July 2022.
Pay across the Private Sector increased by +5.9% annually in the 3 months to March, which was the slowest rise for a year. In contrast, Public Sector pay quickened +5.6%, which was the fastest upturn in nearly 2 decades.
The rest of 2023.
As we come to the middle of the year, legacy problems seem to be holding recruitment and the wider jobs market back.
ONS data tells us that the recent employment rate is still 0.7% lower than pre-pandemic levels. The same source reveals that the number of vacancies stands at +282,000 higher than pre-pandemic levels.
Add to this the record number of economically inactive people (2.55 million) and we are in a position where candidate supply is not able to meet demand. We can only meet the forecasted employer confidence if we tackle skills shortages.
We are severely in need of skills reform, changes to immigration prohibitions and flexible employment regulations that reflect the UK’s need for skills. There must be a joined-up approach where people are put first. Labour market strategies must align with health and education services that support inactive workers back into employment.