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Further drop in permanent staff appointments contrasts with
sustained increase in temp billings
Redundancies stemming from the pandemic lead to a rapid rise in
candidate numbers
Demand for staff weakens again, with consumer-facing sectors
worst hit
The latest KPMG and REC survey data, compiled by IHS Markit,
highlighted mixed hiring trends in November. A further drop in
permanent placements contrasted with marked growth of temp
billings. Recruiters indicated that the second national lockdown
and ongoing uncertainty regarding the coronavirus disease 2019
(COVID-19) pandemic led clients to opt for short-term staff until
the outlook brightened and businesses were operating at more normal
levels.
Weaker levels of business activity were highlighted by the
latest UK PMI survey releases, which also showed employment levels
falling sharply. The PMI and Report on Jobs surveys both widely
commented on redundancies, as many companies faced weak demand and
adopted cost-cutting measures. As a result, overall vacancies fell
further, with retail and hospitality the worst affected areas.
Further drop in permanent staff hiring
The Report on Jobs survey, which monitors over 400 recruitment
consultancies across the UK, provides advance signals of labour
market trends. After rising through the third quarter of 2020,
permanent staff appointments across the UK fell for the second
month running in November as increased COVID-19 infection rates led
to a second national lockdown.
That said, the rate of decline was considerably slower than
recorded at the height of the pandemic earlier in the year. Further
disruptions to business operations led companies to instead opt for
short-term workers, as highlighted by a further marked rise in temp
billings, until market conditions begin to normalise.
The downbeat picture has been confirmed by recent official
labour market data releases. The ONS reported that employment has
now fallen for six successive survey periods, with the latest
official release highlighting a fall of 164,000 over the third
quarter. However, it's important to note that the coronavirus job
retention scheme has helped to stem overall job losses, as
furloughed staff are still counted as being in employment.
Nonetheless, the impact of the pandemic and subsequent furlough
scheme is laid bare when comparing the PMI employment index with
official weekly hours worked data, which have both remained in
negative territory since early 2020 as many companies have either
shed or suspended workers and reduced capacity.
Unemployment likely to rise further amid
redundancies
The furlough scheme has also meant that the unemployment rate
has remained relatively low through the COVID-19 crisis so far.
However, as more redundancies have been reported, particularly in
consumer-facing sectors such as retail, unemployment has been
creeping up in recent months, rising to 4.9% in the three months to
September; the highest since Q4 2016. The increase in unemployment
was signalled in advance by the substantial increases in staff
availability recorded by the recruitment survey in each month since
April, which have shown candidate numbers rising at the steepest
rate since the global financial crisis. Company layoffs have been
widely cited by recruiters as having boosted staff availability,
but there have also been reports of people (particularly those on
furlough) who are job-seeking in order to obtain more secure
employment.
Although the upturn in staff availability eased in November, the
recruitment survey data still suggest unemployment is likely to
rise at a historically strong rate as 2020 draws to a close.
Demand for staff weakens, particularly in retail and
hospitality
The survey's vacancy data recorded a back-to-back monthly
decline in overall demand for staff in November, with the rate of
decline quickening to a solid pace. That said, the fall in
vacancies was much less severe than those seen between March and
August.
Official data have likewise highlighted a marked drop in
vacancies since the pandemic hit, and they remain well down on the
levels seen this time last year (-34.6% on an annual basis in the
three months to October 2020). Encouraging, the recruitment survey
data have shown that demand conditions are near stabilising,
however it's likely to still be some time before vacancy numbers
fully recover.
The fall in total vacancies was driven by a solid decline in
permanent staff demand, according to the recruitment survey, as
temporary positions rose further in November to reinforce the
current preference for flexible short-term, temporary staff.
Detailed sector data reveal that consumer-facing sectors such as
retail and hospitality remained the weakest performers in terms of
permanent vacancies, as restrictions continued to severely limit
business operations and customer numbers. In contrast, the
Nursing/Medical/Care sector has seen the most resilience in 2020 to
date and was the only sector that recorded growth of demand on
average through the year.
Pay trends expected to remain weak
The sharp rise in candidate availability, limited demand for
workers and greater pressure on budgets led to sustained falls in
pay for both permanent and temporary workers in November. While the
drop in permanent starting salaries softened further from May's
nadir, it was nonetheless solid overall. The decline in temp wages
was also less severe than in October. Nonetheless, these trends
point to further weakness in official employee earnings data in the
months ahead.
Outlook for 2021 brightens amid vaccine
news
On a brighter note, the latest UK PMI data showed business
confidence rose to its highest since early-2015 in November, as
firms anticipate that the impact of the pandemic on business
operations would ease substantially over the next 12 months. The
recent news of a vaccine rollout across the UK is likely to further
bolster confidence for the year ahead, and adds to hopes that
businesses will feel more inclined to press on with projects and
hiring in 2021.
The UK PMI and Report on Jobs surveys will be important steers
as to the speed and strength of any recovery in the months
ahead.
Next releases:
4th January 2021: IHS Markit/CIPS UK Manufacturing PMI
6th January 2021: IHS Markit/CIPS UK Services PMI
8th January 2021 : KPMG and REC, UK Report on Jobs
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.
