Permanent placements declined in the UK in January while temp billings increased, according to the “UK Report on Jobs” by KPMG and the Recruitment and Employment Confederation. The report also found that growth in vacancies picked up and labour supply continues to fall as pay pressures remain elevated.

“January’s recruitment activity suggests that speculation about a shallower economic downturn may be justified,” said Neil Carberry, chief executive of the REC. “While permanent placements dropped for the fourth straight month, the pace of contraction slowed, and temporary billings growth accelerated again. The temp market had its fastest month of growth since last September.”

The report also found that starting salaries continued to climb sharply in January even as the UK’s rate of inflation continued to soften. Recruiters surveyed for the report said candidate shortages pushed up rates of starting pay. There were also mentions that the rising cost of living was placing upward pressure on salaries and wages.

The UK’s reduction in permanent staff appointments was broad-based in January across the four monitored English regions — the Midlands, the North of England, the South of England and London.

Both the North of England and London recorded steep increases in temp billings, while the South of England saw a mild expansion and the Midlands registered a modest fall.

Nursing/medical/care topped the rankings of temporary staffing demand as well as posted the strongest growth in perm staff demand.

“January saw permanent vacancies rise at a quicker pace for the first time in nine months, with the rate of demand growth the strongest seen since last October, giving recruiters, employers and job hunters a reason to be cautiously optimistic for the year ahead,” said Claire Warnes, partner, skills and productivity at KPMG UK. “But, with the cost of living continuing to place upward pressure on pay, job security causing low candidate supply and employers relying on temporary staff as permanent placements decline again, the jobs market remains volatile.”

The report is based on a survey of approximately 400 recruitment and employment consultancies in the UK.