Job hunters still set for pay hikes despite ‘looser’ job market: new data
The UK’s labour market continued loosening in December, albeit at a slower pace than the month before, as a poor economic outlook dented hiring activity across the economy.
According to KPMG and REC’s UK report on jobs, the pool of labour continued to “rise sharply” in December thanks to muted hiring activity and increasing redundancies.
Although the increase in labour supply was slower than November, “rates of expansion for both permanent and temporary candidate numbers remained rapid overall,” the report noted.
Placements for both permanent and temporary roles declined, although at a slower pace than November, as firms took a cautious approach entering the new year.
All four regions of England noted a decline in permanent staff appointments, with the Midlands seeing the fastest contraction.
“It’s a muted end to the year for the labour market, which despite some loosening during 2023, continues to be tight,” Justine Andrew, partner and head of education, skills and productivity at KPMG said.
“Businesses are still making redundancies and pausing hiring due to a lacklustre economic outlook,” she continued.
Competition for suitably-skilled workers pushed up rates of starting pay from the month before while pay growth for temporary roles also hit a four-month high.
Despite the monthly increase, wage growth is trending down with starting salary inflation at its second-slowest since March. Andrew suggested pay packages were declining as firms faced “ongoing pressure on their budgets”.
The Bank of England is watching developments in the labour market very closely as it considers when to loosen monetary policy.
A tight labour market has fuelled strong pay growth over the past 18 months and rate-setters have insisted that annual wage growth at around seven per cent is inconsistent with meeting the two per cent target.
However, inflation has come down faster than expected while there are signs that wage growth is beginning to ease too.