Hiring activity across the UK remained subdued in May with permanent placements falling and temp billings growth easing, according to the latest KPMG and REC (Recruitment and Employment Confederation) “Report on Jobs” compiled by S&P Global.

Persistent uncertainty around the economic outlook and delayed decision-making continued to weigh staff placements midway through the second quarter as permanent staff appointments fell for the eighth month in a row and at the quickest rate since January 2021. At the same time, temp billings expanded at the softest pace since last October and only slightly.

The drop in permanent placements was broad-based among the four monitored English regions, led by London. Temp billings rose sharply in London and the South of England but declined in Northern England and the Midlands.

The report also showed that the overall availability of labour improved for the third month running in May. The rate of expansion was the sharpest seen for nearly two and a half years  with recruiters often linking the upturn to redundancies and a slowdown in hiring activity.

Permanent candidate availability increased at a sharper rate than that seen for temporary staff. The former rose at the quickest rate for 29 months, while the latter recorded the strongest upturn since February 2021.

In terms of vacancies, growth in demand for staff slowed for the third straight month in May, with overall vacancies expanding at the softest pace since last December. The increase was also the second-weakest recorded since February 2021.

Permanent vacancies increased at a faster pace than that seen for temporary roles, but rates of growth were nevertheless the slowest seen for five and 33 months respectively.

Growth of demand for staff was sustained across both the private and public sectors during May. However, rates of expansion moderated across the board compared to April. The strongest rise in vacancies was seen for temporary positions in the public sector, closely followed by permanent roles in the private sector. The softest upturn in demand was seen for temporary staff in the private sector, which expanded marginally.

Meanwhile, the higher cost of living and efforts to attract skilled staff continued to place upward pressure on starting pay during May. Salaries for newly placed permanent staff rose at a historically sharp pace overall — albeit one that was the softest seen for just over two years. Temp pay growth also edged downward since April and was the second slowest since April 2021.

“Despite the overall temporary work market continuing to grow and permanent hiring declining from the sugar rush of 2022, the story can vary widely across different businesses as their economic outlook remains unclear,” said Neil Carberry, REC chief executive.

“For hiring businesses, greater candidate availability will help resolves shortages, though inflation means wage growth remains high,” Carberry continued. “In addition, candidates may have to change sectors in their job search, so there is not an automatic increase in candidate supply for shortage roles. All of this puts a premium on getting our response right as businesses, looking at skills development and widening the net of places that firms look for candidates. Recruiters can help with this.”

Claire Warnes, partner of skills and productivity at KPMG UK, said, “The jobs market remains subdued, with the latest survey results showing dampened hiring activity amid ongoing economic concerns.”

“Overall vacancy growth slowed for the third month as businesses delayed hiring decisions, and permanent staff appointments fell for the eighth month in a row as many employers stick to temps,” Warnes added. “Businesses ready to grow can feel optimistic about an increasing pool of available candidates, which has expanded at the sharpest rate in two and a half years.”