Strong demand for staff and widening skill shortages pushed pay rates higher

The latest monthly Labour Market Report from Bank of Scotland Corporate showed a further increase in recruitment consultanciesí permanent and temporary business in June, as job market conditions in Scotland continued to improve. However the rate of improvement in the labour market eased slightly compared to the previous month. Meanwhile, the latest survey data suggested that strong demand for staff and widening skill shortages had again resulted in upward pay pressures.

Summary for June 2004

The Labour Market barometer remains well above the 50% index reading which points to an improving employment market. The reading of 58.2 in June 2004 compares to a reading of 48.1 in June 2003, when the jobs market was weakening.
Improved job marked conditions reflected strong growth of overall demand for staff, appointments and staff pay rates. The staff availability component of the Barometer also continued to yield a positive contribution in June (the index is inverted in the calculation of the Barometer).
The number of people placed in permanent jobs rose for the eleventh consecutive month, with Edinburgh recording the strongest increase of Scotlandís four principal cities.
Salaries awarded to people placed in new jobs and temporary staff hourly pay rates were both up sharply compared to May.

Commenting, Tim Crawford, Group Economist at Bank of Scotland, said:

ìThe latest Labour Market Report suggests that the recent strength in the Scottish economy is translating into jobs growth in most major business centres. Demand increased for the main job types in our survey and this exposed widening skill shortages. In this environment employers are continuing to offer higher pay rates for both permanent and temporary staff.î

Regional analysis
ëPermanent staff placements rise at fastest rate in Edinburghí

As was the case in the previous month, the number of people placed in permanent jobs by recruitment consultancies rose at the fastest rate in Edinburgh in June. Permanent staff placements also rose in Aberdeen and Glasgow. Only in Dundee were staff appointments lower than a month earlier.
Average pay rates awarded to people placed in permanent and temporary positions continued to rise across Scotlandís four main cities in June.
The sharpest increase in permanent staff salaries were recorded in Edinburgh and Glasgow, closely followed by Aberdeen. In Dundee, where skill shortages were less acute, growth of permanent staff salaries was only modest.


Wages and salaries
Tightening job market pushed pay rates higherí

Widening skill shortages, as a result of strong demand for staff, enabled candidates to command higher pay rates in June.
Average salaries awarded to people starting new jobs rose for the twelfth successive month, although the rate of wage inflation was slightly less marked than that recorded in the previous month.
Temporary/contract staff hourly pay rates were also up markedly compared to a month earlier in June. The rate of increase in pay rates moderated slightly, mirroring the trend recorded for the average for the UK as a whole.


Employment
ëPermanent staff placements rise at faster rate than UK averageí

The number of people placed in permanent jobs by recruitment consultancies in Scotland increased strongly in June ñ the eleventh consecutive monthly rise. The rate of increase in placements remained faster than the UK average, although this eased slightly compared to May.
Average weekly billings received from the employment of temporary and contract staff in Scotland rose for the sixteenth successive month in June. Agencies linked higher billings to a sharp improvement in demand for temporary staff, as well as client promotions and increased marketing activity.


Vacancies
ëDemand for staff stronger than UK averageí

Demand for permanent staff rose substantially in June. This was the thirteenth successive month that the number of permanent staff job vacancies in Scotland had increased on a month earlier. Moreover, at 62.3, the seasonally adjusted index of permanent staff vacancies in Scotland remained higher than the equivalent index for the UK as a whole for the third month in a row.
Vacancies aimed specifically at temporary and contract staff rose for the sixteenth successive month in June. Moreover, at 65.1, the rate of growth of demand for temporary staff signalled by the index of temporary staff vacancies continued to gather pace compared to the previous month and pulled away from the UK average. Rising demand for temporary staff continued to be driven by increased workloads at clients.
The availability of candidates to fill vacant permanent positions at employers deteriorated for the fourth month running in May. Meanwhile, temporary staff availability has fallen continuously since May 2003, with the rate of deterioration during the latest survey period remaining sharp. As a result of widening skill shortages, many recruitment consultancies reported difficulties filling certain vacancies.


Sectoral
ëDemand rises for all main categories of employeeí


Recruitment consultancies reported a marked improvement in demand for all main types of employee in June.
For both permanent and temporary staff categories, growth of demand was the strongest for Executive/Professional staff.


The Bank of Scotland Corporate ëLabour Market Barometerí
A key tool in the Monthly Labour Market Report is the ëLabour Market Barometerí. The Barometer is a composite indicator devised from four key measures: demand for staff; employment (appointments); availability for work; and pay in the permanent and temporary markets.
By remaining above the critical 50.0 no-change mark in June, the Barometer signalled an improvement in Scottish job market conditions for the eleventh month running. At 58.2, the rate of improvement implied by the Barometer remained strong, although it was slightly weaker than that recorded in May.
All four components exerted positive contributions on the Barometer in June but, in each case, to a slightly lesser extent than May. This caused the overall level of the Barometer to decline modestly.
Although pointing to a strong improvement in the Scottish recruitment market, the Barometer for Scotland remained below the equivalent UK index for the eleventh successive month.

UK regional labour market summary

In Scotland, the number of people registered as jobless and seeking work at job centres fell by 1,800 to 92,700 in May. After taking into account the number of workforce jobs, the unemployment rate fell to 3.5% in May -- its lowest since June 1975. The claimant count rate in Scotland is back on par with that recorded in London. The number of people registered at UK job centres as unemployed and seeking work fell to 862,000 in May -- equivalent to 2.8% of the working population. The lowest unemployment rates continued to be found in the South East and South West (1.6% for both regions). The East and East Midlands also exhibited unemployment rates below the UK average (2.0% and 2.5% respectively).



The Labour Market Barometer from Bank of Scotland Corporate is an average of survey indexes relating to the demand for staff, permanent placements, temporary billings, the availability of staff, salaries awarded to permanent staff and average hourly rates for temp/contract staff. (The index for staff availability is inverted in the amalgamation process.)

This report, conducted by NTC, is based on a monthly survey of over 100 recruitment and employment consultants, and provides up-to-date information on Scottish labour market trends and is seasonally adjusted. The Report includes a series of labour market indicators with data up to February 2004.

The information in this report is directly comparable with the Deloitte/REC Report on Jobs survey for the UK, which uses an identical methodology. The Deloitte/REC index for the UK has a strong track record of accurately anticipating changes in unemployment, employment and average earnings. Visit www.ntc-research.com for further information.

NTC Research is one of the world’s largest specialist providers of business research information, operating business surveys on behalf of blue chip clients. Current research includes continuous surveys providing original data on economic conditions in the UK, Germany, France, Italy, Spain, Netherlands, Austria, Ireland, Greece, Russia, Poland, the Czech Republic, Japan and Hong Kong. NTC surveys are widely used by governments, businesses and financial markets. For further information please visit