Downturn in UK Labour Market Continued in September

The most up-to-date source of monthly UK labour market data and analysis

The Report on Jobs is a monthly publication produced by Markit Economics and sponsored by the Recruitment and Employment Confederation and KPMG LLP.

The report features original survey data which provide the most up-to-date monthly picture of recruitment, employment, staff availability and employee earnings trends available.

Key points from September survey:

Permanent placements fell at the fastest pace for eighty-three months, while temp billings declined at a series-record pace.

Sharpest drop in overall demand for staff in eleven-year survey history.

Nursing/Medical/Care remained the only main staff category to record growth of vacancies, with falls registered elsewhere.

Availability of permanent and temporary candidates increased at rapid rates.

Permanent staff salaries static while temporary staff pay rose at the weakest pace for over five years.

Commenting on the latest survey results, Alan Nolan, Director at KPMG said:

“The impact of the banking crisis has caused the UK jobs market to deteriorate in such a manner not seen since September 2001. Employers are clearly feeling the effects, with redundancy programmes at the centre of all cost reduction strategies and by refusing to invest in the skills available in an ever increasing labour pool. Continuing pressure on both permanent and temporary placements may also see a radical overhaul of the manner in which the UK recruitment industry operates. This may involve further consolidation, strategic collaboration between agencies and maximum automation of process, as the industry seeks to ride out the storm.”

The main findings for September are:

Placements and billings fell sharply…

Recruitment consultancies reported further reductions in both permanent and temporary staff appointments during September. Permanent placements declined at the fastest pace since October 2001, while temp billings fell at a series-record pace.

Demand for staff continued to contract

September data pointed to a drop in permanent job vacancies for the fifth straight month, with the rate of contraction accelerating to the sharpest since December 2001. Demand for temporary/contract workers declined at the fastest pace in the eleven-year survey history.

Strongly rising candidate availability

Reflecting lower staff appointments and recent redundancies, the availability of candidates to fill vacancies increased substantially in September. Growth of permanent staff availability was the sharpest since December 2001, while temp availability increased at a survey-record pace.

Restrained wages and salaries

Following a sixty-one month period of growth, permanent staff salaries were unchanged in September. Temp pay rose only marginally and at the weakest rate for over five years.

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Staff appointments

Recruitment consultancies report on the number of people placed in permanent jobs each month, and their revenues (billings) received from placing people in temporary or contract positions at employers.

Recruitment consultancies continued to report falling levels of permanent and temporary placements in September. In both cases, the rates of decline accelerated since the previous month.

Placements fell at the sharpest rate for eighty-three months

The number of people placed in permanent jobs by recruitment consultancies declined for a sixth consecutive month in September. Furthermore, the pace of contraction quickened to the sharpest October 2001. Anecdotal evidence suggested that a deteriorating economic climate and associated lack of business confidence had resulted in many clients placing recruitment on hold.

Decline in temp billings hit new series-record

Latest data signalled that agencies’ billings from the employment of short-term staff fell for the second month running in September, and at the fastest rate since data were first collected in October 1997. Panellists often commented on lower activity levels at clients which had resulted in a drop in temp billings.

An index reading above 50 signals a higher number of placements/billings than the previous month. Readings below 50 signal a decline compared with the previous months.

Sharp drop in demand for staff

Overall demand for staff fell for a fourth successive month in September. Furthermore, a fall in the Report on Jobs Vacancies Index from 45.1, to 43.3, signalled that the rate of decline accelerated to the sharpest in the eleven-year history of the survey.

Permanent staff vacancies

The Permanent Staff Vacancy Index recorded 43.1 in September, its lowest level since December 2001, to signal a marked rate of decline in demand for permanent staff.

Temp/contract vacancies

Demand for short-term staff fell for the third consecutive month in September. Furthermore, the rate of contraction accelerated to a new series-record, as indicated by the Temporary Staff Vacancy Index slipping from 47.7 to 46.4.

Other vacancy indicators

Government data on job vacancies signalled a year-on-year fall for the second consecutive month in August. Furthermore, the rate of decline accelerated to 8.0%, the sharpest since July 2002.

Latest data pointed to continued strong growth of online recruiting during Q2, with internet job adverts up 22.1% on a year earlier.

The Job Vacancies Index monitors the overall demand for staff at recruitment consultancies. An index reading above 50 signals a higher number of vacancies than the previous month. Readings below 50 signal a decline compared with the previous month.

Staff availability

Recruitment consultants are asked to report whether availability of permanent and temporary staff has changed on the previous month. An overall indicator of staff availability is also calculated.

Surge in candidate availability

Recruitment consultants widely reported improved candidate supply in September, which they frequently linked to recent redundancies.

Availability of permanent staff

The availability of candidates to fill permanent vacancies increased for the sixth month running in September. Moreover, the rate of expansion accelerated, matching the series high registered in December 2001. Over half of panellists recorded a rise in permanent candidate availability during the latest survey period.

Availability of temporary/contract staff

Temporary/contract staff availability rose at a series-record pace in September, with 49% of consultants reporting an increase. The latest improvement in temp availability was the sixth in successive months.

Pay pressures

The recruitment industry survey tracks both the average salaries awarded to people placed in permanent jobs each month, as well as average hourly rates of pay for temp/contract staff.

Permanent salaries

Average permanent staff salaries were unchanged in September, ending a sixty-one month period of inflation. Panellists reported that pay deals had been dampened by stretched client budgets and reduced demand for staff.

Temp/contract pay rates

Hourly rates of pay for staff in temporary/contract employment rose at the weakest rate for over five years in September. Survey respondents cited strongly rising levels of candidate availability as the main factor weighing on temp pay.