UK businesses experience a reduction in employment growth due to ongoing economic uncertainties

UK Labour Market Faces Challenges Amid Economic Uncertainty

The UK labour market is experiencing a mixed picture, with some positive signs and areas of concern, according to recent data and analysis.

The Recruitment and Employment Confederation (REC) and KPMG's latest report on jobs has revealed that unemployment is forecast to remain near four-decade lows at 3.8% in the coming days. However, this optimistic outlook is tempered by other findings.

Wage growth, for instance, dropped to its weakest rate in over two years in June, a trend noted by Neil Carberry, the chief executive of the REC. Carberry also highlighted ongoing skills shortages in sectors like accountancy, construction, teaching, and nursing.

Employers are favouring temporary hiring over permanent jobs due to lingering economic uncertainty. This shift is reflected in the decrease in the number of people placed in permanent jobs by recruitment agencies in June.

The cost of living crisis and rising inflation are adding to pressures on households' spending power, leading to more people seeking new jobs. According to Carberry, this trend is likely to continue.

Claire Warnes, a partner at KPMG UK, expressed concern about the sharp increase in candidate availability, indicating a slowdown in recruitment and increasing job losses. Economists are watching for signs of weakening growth in the UK economy.

In contrast, there has been growth in vacancies for temporary and permanent staff in sectors such as hotels and catering, blue-collar jobs, and retail. Companies in sectors like technology, customer service, project management, and data entry are increasingly preferring contract-based employment over permanent jobs to gain flexibility, reduce long-term commitments, and manage fluctuating workloads.

The hit to incomes may have increased the number of women planning to work beyond retirement age. According to Rest Less, a provider of jobs listings and advice to over-50s, 44% of women aged between 50 and 65 planned to either stay in work on their existing hours or reduced hours. The cost of living crisis is likely to have further increased this number, with Stuart Lewis, the chief executive of Rest Less, predicting that the number of women planning to continue working after reaching state pension age is likely to have risen further.

Financial markets expect further interest rate increases in the coming months as the Bank of England attempts to drive down inflation. The Bank of England has already raised interest rates rapidly from 0.1% in late 2021 to 5%.

In conclusion, while the UK labour market continues to show resilience, with unemployment remaining low, there are challenges ahead. The economic uncertainty, cost of living crisis, and ongoing skills shortages are putting pressure on both employers and employees. The shift towards temporary and contract-based employment, as well as the increasing number of women planning to work beyond retirement age, are indicative of these pressures.