Job Market Report For Dec 14

Key Points in Summary

  • Growth of permanent placements eases to 18-month lowopen notebook
  • Strong Salary Growth
  • Further marked drop in staff availability
  • Average earnings and Inflation, any improvement?

In the world of staff appointments for November, the rate at which permanent roles are placed, rose at its slowest rate in 18 months. Several sources found they experienced a shortage of skilled candidates and slower client decision-making with this appearing worst in London. Although in the Midlands a stronger growth was experienced.

The demand for staff from employers is rising at its lowest rate in 13 months. The latest official data from the Office for National Statistics shows that vacancies rose by 24.7% on an annual basis in the three months to October. Furthermore, internet-based recruitment spending continued to increase at a strong annual pace. Latest data showed an 8.8% rise in Q2 2014 from the corresponding period one year earlier.

Good news in terms of salaries with the average starting salaries for permanent jobs continuing to rise in November although this is after October’s 8 month low. This has largely been attributed to stronger competition between employers for quality candidates. This increase was sharpest in the Midlands and slowest in London.

Adding on to this, averaging earnings growth has caught up with inflation for the first time in five years. Data from the Office for National Statistics showed that average earnings, excluding bonuses, rose 1.3% on an annual basis in September. Consumer price inflation in September was 1.2%, rising to 1.3% in October. However, earnings including bonuses were up just 1.0%. Pay growth has remained sluggish in spite of the recent recovery in employment. In a recent speech (“Twin Peaks”, 17 October), Bank of England Chief Economist Andrew Haldane drew attention to ongoing structural changes in the labour market which he argues have led to “polarising patterns” at the upper and lower ends, in turn resulting in a marked rise in wage dispersion.

 

On the one hand, high-skilled professions such as IT, engineering and construction continue to see skill shortages, leading to increased rates of pay for new hires, as signalled by the Report on Jobs in recent months. On the other hand, lesser-skilled jobs have seen a rise in the supply of labour which has more than offset rising demand, thus depressing wages.

Haldane identifies three key drivers of this. First, the ‘hollowing out’ of mid-skill jobs, a longer-term trend reinforced by the financial crisis, has led to displaced workers seeking jobs for which they are overqualified. Second, labour force participation has risen significantly, particularly among women and older age cohorts, reflecting changes to the default retirement age and benefits regime, plus concerns over the adequacy of pensions and savings. Third, immigration over the last 20 years has boosted the supply of labour.

As Haldane puts it: “This paints a picture of a widening distribution of fortunes across the labour market – a tale of two workers” … “This has been a jobs-rich, but pay-poor, recovery.”

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Nikki joined Recruitment Connection in 2014 and undertakes industry research to provide relevant articles, information and writings for our blog.