A weaker economic climate and reduced market confidence weighed on recruitment activity during July, according to the latest Report on Jobs from the Recruitment and Employment Confederation and KPMG, compiled by S&P Global.

Permanent staff appointments declined at the steepest pace for just over three years, as concerns over the outlook made clients hesitant to commit to new staff. A drop in client confidence was also blamed for the hesitancy. Additionally, an insufficient supply of workers with specific skills was also cited as a factor limiting recruiters' ability to fill roles.

All four monitored English regions posted a decline in permanent placements, led by London.

Concurrently, growth in temp billings edged down to a fractional pace that was the slowest recorded since last October.

According to anecdotal evidence, more flexible staffing arrangements were often preferred by companies amid the subdued economic outlook. However, there were reports that limited candidate numbers, often due to peoples' preference for permanent roles, and a general softening of demand conditions had weighed on growth. Divergent trends were seen at the regional level, with temp billings rising in the Midlands and London, but falling in the North and South of England.

Growth of demand for staff continued to moderate at the start of the third quarter. Notably, total vacancies increased at the slowest pace in 29 months, and one that was well below the series trend. July survey data signalled historically subdued upturns in demand for both permanent and temporary staff across the UK

The latest survey highlighted slightly stronger increases in demand for staff in the private sector, but rates of vacancy growth cooled in the public sector. The strongest overall upturn in demand was signalled for temporary workers in the private sector. Meanwhile, the weakest increase in vacancies was seen for short-term roles in the public sector, which rose only marginally.

Demand for permanent workers increased across the majority of monitored sectors during July. Blue-collar topped the rankings, closely followed by hotel & catering.

Hotel & catering saw by far the steepest upturn in demand for temp workers of all ten categories in July. Strong rates of vacancy growth were also reported for engineering and blue-collar personnel.

The report also showed that faster increases in the supply of both temporary and permanent workers drove the sharpest upturn in overall labour supply since December 2020. There were frequent reports that redundancies and hiring freezes had underpinned the latest improvement in staff availability.

Recruiters across the UK signalled a sharp and quicker rise in the availability of permanent workers at the start of the third quarter. The supply of permanent labour has now risen in each of the past five months, with the latest expansion the steepest seen in just over two-and-a-half years. All four monitored English areas recorded rapid increases in permanent candidate availability, with London seeing the quickest rate of growth.

July’s survey data indicated that the upturn in temporary candidate numbers also gathered pace. Though not as rapid as that seen for permanent labour supply, the latest increase in short-term staff availability was also the most pronounced since December 2020.

Recruiters often commented that reduced recruitment activity and company layoffs had increased the pool of available temp workers. London recorded the sharpest expansion in short-term worker supply, while the softest was seen in the South of England.

Competition for skilled candidates and the increased cost of living continued to place upward pressure on rates of starting pay during July. Salaries for newly placed permanent workers rose sharply, despite the rate of inflation slipping to the lowest since April 2021. Temp pay meanwhile increased at the softest pace in 29 months, albeit solidly overall.

Neil Carberry, REC Chief Executive, said, “The jobs market overall remains fairly robust, with vacancies and pay still rising and unemployment low but there is a sense in today’s report that the economy will need some growth soon to sustain this positive picture.”

“Permanent hiring has been slowing all year,” Carberry added. “To some extent this is normalisation as the post-pandemic boom abates, but it is also driven by uncertainty. This is seen in the scale of companies reshaping themselves while hiring in other areas, recruiters report that the quickest rise in labour supply since the pandemic has been driven by an increase in redundancies. But it is also obvious in the way firms are relying on temporary labour to keep things going in uncertain times.”

Claire Warnes, Partner, skills and productivity at KPMG UK, said, “For job seekers, the ongoing competition for skilled workers and cost of living pressures are keeping starting salaries high, making it an attractive time to move roles, though they may be cautious about doing so. To rebalance the labour market and aid economic recovery, more focus on reversing the deepening skills gap would be a step in the right direction.”