Uncertainty around the economic outlook contributed to the thirteenth successive monthly reduction in permanent staff hires across the UK, according to the October Report on Jobs by the Recruitment and Employment Confederation, KPMG and compiled by S&P Global. Notably, the rate of decline eased to the weakest since June.

The drop in permanent staff hiring was frequently linked to caution around the economic outlook, with recruitment freezes, delays to hiring decisions and fewer vacancies all cited by panellists. On a regional basis, London saw an accelerated and rapid decline in permanent placements that was the sharpest of all four English areas. Falls were also seen in the South and North of England, but a fractional rise was recorded in the Midlands.

At the same time, the report showed a back-to-back rise in temp billings as some employers preferred the flexibility of short-term staff in the current climate. Recruiters often mentioned in the research that firmer demand for short-term staff due to its greater flexibility supported the latest upturn in billings. However, others indicated that budgetary pressures and fewer than anticipated projects at clients had dampened overall growth.

Three of the four monitored English regions registered higher temp billings at the start of the fourth quarter, led by London. The North of England bucked the wider UK trend and recorded a modest reduction.

In terms of vacancies, the report noted that after declining slightly for the first time since February 2021 during September, overall demand for staff stabilised at the start of the fourth quarter.

Permanent staff vacancies fell for the second successive month in October, albeit with the rate of decline easing to a fractional pace. Growth of demand for temporary workers meanwhile slowed to a modest pace that was the least pronounced since May.

Meanwhile, a slight increase in demand for permanent staff in the private sector helped to offset a further reduction across the public sector at the start of the final quarter of the year. Temporary vacancies continued to rise in the private sector, with the rate of growth picking up slightly from September. In contrast, demand for short-term staff in the public sector fell solidly and to the greatest extent in over three years.

Across permanent vacancies, half of the ten monitored employment categories registered stronger demand for permanent workers at the start of the fourth quarter, led by nursing/medical/care. The construction and retail sectors meanwhile saw the quickest drops in permanent staff vacancies.

Temporary staff vacancies expanded in six of the ten monitored employment sectors during October. The hotel & catering and nursing/medical/care categories saw the strongest rates of growth. The sharpest reduction in demand was meanwhile seen for temporary retail staff.

October’s data also signalled that the overall availability of candidates increased for the eighth successive month.

As has been the case since March, the availability of staff to fill permanent positions across the UK increased during October. Notably, the rate of expansion quickened to a rapid pace that was the third-sharpest since December 2020. Recruiters frequently mentioned that staff supply had risen due to companies restructuring workforces and redundancies. All four monitored English regions registered steep upturns in permanent labour supply in October, with rates of expansion accelerating in all areas bar the North of England.

The latest data also pointed to a sustained rise in the number of temporary candidates across the UK at the start of the fourth quarter. Although the rate of increase edged down further from August's 32-month record, it remained sharp overall. Where higher temporary labour supply was reported, panel members often linked this to company layoffs and fewer projects, partly due to pressure on client budgets. The rise in temporary candidate numbers was broad-based by English region, with the South of England noting the steepest rate of growth.

Average starting pay for permanent staff continued to increase. Though sharp and in line with the series average, the rate of inflation was the softest recorded in 31 months. Recruiters widely cited that competition for suitably skilled staff and the higher cost of living had placed further upward pressure on pay. The quickest increase in starting salaries was seen in London, while the softest was registered in the South of England.

In terms of temp pay, recruitment consultants signalled a sustained rise in average hourly pay rates for short-term staff in October. Although solid, the rate of wage growth was only slightly stronger than September's 31-month low and weaker than the series average. The report pointed to anecdotal evidence which showed that employers had increased temp pay to attract and secure suitable candidates. However, greater pressure on client budgets had weighed on overall growth. All four monitored English regions noted higher temp wages, led by the North of England.

Neil Carberry, REC chief executive, said, “While permanent hiring is now declining more softly, temporary hiring continues to pick up the slack – with billings gently growing for most of this year on the back of rising wages. While the rate of pay growth has now returned to more normal parameters, it is still strong, especially in sectors where staff remain in short supply. That sectoral split is ever more pronounced, with challenging sectors like construction and IT sitting in a very different place to hospitality and healthcare, which continue to be affected by shortages.”

Claire Warnes, partner, skills and productivity at KPMG UK, said, “The jobs market is facing a cyclical challenge, there are people out there who want to work, and there’s a decent availability of candidates, but they often do not have the right skills for the roles on offer. This means higher starting salaries are still being offered as businesses compete in the ongoing battle for talent.”

“And while the rate of decline in permanent placements is the weakest since June, this follows more than a year of cautious hiring due to economic uncertainty and means many businesses are unable to commit to long-term strategies and instead are having to focus on the here and now, by employing temps,” Warnes said. “The sharper rise in available candidates is good news for recruiters, but this comes at the expense of employers who are making more redundancies as they tighten budgets due to ongoing high inflation.”

Warnes said, “With a weak economic outlook for the months ahead, employers will be hoping next year will bring the expected easing of inflation so they can focus on delivering growth for their businesses.”