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The gravity-defying jobs market appears to be heading for a downturn as recruitment companies report the biggest drop in hiring for three years.

Permanent recruitment fell for the first time in six months in June, while hiring of temporary staff was down for the seventh month running and at an accelerating rate, according to a survey of 400 job agencies by the Recruitment and Employment Confederation and KPMG.

The data suggest unemployment may shortly start to rise, partially resolving the puzzle whereby the jobless total has recently been falling despite the UK being officially in a double-dip recession.

Bernard Brown, head of business services at KPMG, said if the acceleration of the hiring decline continued, there was a “very real chance” of unemployment, currently 2.61m, reaching 3m “in the not too distant future”.

London, the Midlands and northern England all registered lower permanent hiring, with only southern England posting growth. Vacancies grew at their weakest rate for five months.

Kevin Green, the REC’s chief executive, said: “A decrease in hiring activity means we could see a period of increased unemployment, especially as a new wave of school leavers and graduates will be entering the labour market over the summer.”

The UK labour market had been remarkably resilient throughout the downturn, he said, but employer confidence was fragile in the face of the eurozone crisis.

Mr Green added: “The picture is not uniform across all industries. If you are a skilled engineer, IT professional or in nursing or secretarial work, there is still increasing demand for you from employers.”

Job agencies said the fall in permanent hiring resulted from slowing activity at client companies and employers taking longer to make recruitment decisions.

Hiring of temps declined at its fastest rate since July 2009, blamed on client cost cutting, additional bank holidays around the jubilee and, in some cases, the effect of the new agency workers’ regulations, giving staff equal pay with permanent staff after 12 weeks.

The REC’s index gave a reading of 46.8 for permanent staff, down from 51 in May, and 47.1 for temps, down from 47.5. Any reading above 50 indicates a rise in job placements compared with the previous month.

There was brighter news in the professional sector, where the Association of Professional Staffing Companies reported a return to growth last month after a drop in early spring. Finance, accounting and IT led the recovery.

Permanent job placements rose 17 per cent on May’s figure and 34 per cent on last December’s low point, but vacancies were still well down on a year ago.

Ann Swain, Apsco’s chief executive, said: ““The latest data are an improvement on the bad news from early spring, but it’s not clear that this is the beginning of a long-term positive trend.

“The growth from the low-point in December hasn’t been as consistent or widespread as we would have hoped. It’s a very unsettled picture out there.”

Copyright The Financial Times Limited 2017. All rights reserved.
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