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Latest jobs survey data point to much weaker official data
trends amid COVID-19 crisis
Hiring of both permanent and temporary staff continues to fall
sharply as demand for workers slumps
Candidate availability rises to greatest extent since July 2009
due to redundancies and furloughed staff
Downward pressure on pay, partly due to cost cutting
The latest KPMG and REC Report on Jobs data, compiled by IHS
Markit, showed a further severe drop in hiring activity across the
UK as firms placed their recruitment plans on hold amid the
coronavirus disease 2019 (COVID-19) pandemic. Permanent placements
and temp billings fell at the second-sharpest rates on record
(behind only April 2020), while the weaker business outlook led to
a further steep reduction in vacancies.
Meanwhile, reports of redundancies and workers being placed on
furlough led to the quickest rise in candidate availability since
mid-2009. At the same time, weak demand for staff and greater
pressure on client budgets drove a marked decline in starting
pay.
The weak recruitment data add to evidence, including the recent
IHS Markit/CIPS UK PMI surveys, that labour market conditions
have deteriorated severely since the outbreak of the coronavirus
and subsequent lockdown.
Slightly softer, but still severe, fall in recruitment
activity in May
The Report on Jobs survey, which monitors over 400 recruitment
consultancies across the UK, provides advance signals of labour
market trends. The survey has indicated a marked decline in
conditions since the UK economy went into lockdown at the end of
March.
The number of people placed into permanent job roles fell
sharply for the second month running, albeit with the rate of
contraction easing from April's record pace. Billings received from
the employment of short-term staff likewise fell at the
second-quickest rate in more than 22 years of data collection.
Recruitment agencies widely reported that the COVID-19 outbreak
had led to a sharp reduction in demand for workers, with many
clients remaining closed or running at reduced capacity in May.
Only healthcare vacancies increase in May
The virus outbreak continued to have a detrimental impact on
demand for staff, as many firms struggled to maintain current
levels of employment. At 19.3 in May, the index measuring total
staff vacancies was up from April's record low of 9.3 but remained
well below the neutral 50.0 mark and therefore signalled a further
substantial fall in vacancies.
Vacancy data split by sector showed that only healthcare saw an
increase in demand for workers during May. In contrast, substantial
falls were seen across all nine other remaining segments, led by
Retail and Hotel & Catering, which have also been the hardest
hit by coronavirus restrictions.
Latest official vacancies data published by the ONS have also
highlighted a marked fall in demand for staff. Vacancies declined
by 170,000 to 637,000 in the three months to April from the
previous three months. This marked the largest quarterly rate of
decrease since the series began in 2001. The recruitment industry
survey hints that official vacancy numbers may continue to drop
sharply in upcoming releases.
Staff availability rises to greatest extent since
2009
The coronavirus outbreak has also led to a sharp rise in
candidate availability during the last two months. The May survey
data signalled the steepest increase in overall staff supply since
July 2009, as recruitment agencies reported increased number of
candidates applying for positions following redundancies or having
being placed on furlough.
The steep and accelerated rise in availability signals that
unemployment is likely to increase further during the second
quarter. The latest ONS data showed unemployment rising by 58,000
in the three months to March, while the timelier jobs survey data
suggests job losses could edge closer to 150,000 in May. However,
its worth noting that furloughed workers are not included in
unemployment statistics, as they are kept on payrolls, which is
likely to help limit any changes in official numbers.
Pay trends weaken notably amid uncertain outlook and
budget cuts
Faltering demand for workers and lingering uncertainty around
the COVID-19 pandemic meanwhile led to marked falls in starting pay
during May, with many recruiters noting that clients had cut their
budgets as part of efforts to contain costs.
Notably, starting pay for both permanent and temporary workers
fell at the quickest rates since 2009. The index measuring starting
salaries, which generally acts as a good leading indicator for
official earnings growth, suggests that total average weekly
earnings growth may weaken further from its current rate of 2.4%
and move closer to stagnation in upcoming releases.
Outlook remains gloomy
There remain a number of downside risks to the labour market and
wider economy at present.
First, uncertainty over the pandemic, and a slow and careful
reopening of the economy, is likely to weigh on demand for workers
in the coming months as many firms will be looking to contain costs
or be operating below capacity due to social distancing.
Second, the winding down of the government's Job Retention
Scheme over the coming months could lead to a steep rise in
unemployment. Firms may need to shed staff if sustained weak demand
means they are unable to finance employment costs.
Third, uncertainty regarding the UK's departure from the
European Union, and whether this occurs with or without a trade
agreement, has also clouded the outlook and could dampen hiring and
investment.
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
