Candidate shortage continues in 2023

A more cautious approach to staff hiring was evident at the start of 2023 amid ongoing economic uncertainty and cost pressures. The latest KPMG and REC, UK Report on Jobs survey, compiled by S&P Global, highlighted a further fall in permanent staff hires, while temp billings increased only slightly. Recruitment efforts were also stifled by ongoing candidate shortages, though there were further signs of the downturn in labour supply easing in January.

More encouragingly, overall vacancy growth picked up for the first time in nine months. The uptick remained slower than the survey’s average, however. Nevertheless, pay pressures remained historically strong, as firms responded to greater competition for staff and the rising cost of living by increasing salaries and wages.

Permanent placements fall for fourth straight month

Lingering uncertainty over the economic outlook and hesitancy to commit to new permanent hires weighed on recruitment activity at the start of 2023. Permanent staff appointments fell for the fourth month in a row, albeit at the slowest rate over this period. Firms instead often leaned on temporary workers to fill vacancies. Temp billings rose at the quickest rate since last September, albeit mildly overall.

Growth of demand for staff picks up slightly

Recruiters signalled a stronger increase in demand for staff during January, with overall vacancies expanding at the quickest rate for three months. That said, the upturn remained softer than the survey’s long-run trend. Temp vacancies rose at a stronger rate than permanent staff demand, but there was an improvement in growth for the latter and a slowdown for the former.

Starting pay inflation remains elevated

Starting salaries continued to climb sharply in January. The rate of inflation continued to soften from March 2022’s all-time record, however, and was the slowest seen in 21 months. In contrast, temp pay inflation quickened to a four-month high at the start of the year. According to recruiters, candidate shortages pushed up rates of starting pay, while there were also mentions of the rising cost of living placing upward pressure on salaries and wages.

Overall candidate numbers fall at softer, but solid rate

The downturn in total candidate supply moderated further at the start of the year. Though solid, the rate of contraction was the softest seen since March 2021 and much slower than the average over 2022 as a whole. A weaker fall in permanent labour supply helped to offset a quicker drop in temp candidate numbers. Recruiters frequently mentioned that the uncertain economic climate, concerns over job security and generally tight labour market conditions had limited the availability of workers.

The report is compiled by S&P Global from responses to questionnaires sent to a panel of around 400 UK recruitment and employment consultancies.