Recruitment market performed well in 2004 but staff shortage emerging

In December, permanent placements and temporary billings both again rose, but at slower rates, while permanent and temporary staff pay rates grew but also at a more modest rate than earlier in the year. Meanwhile, the availability of staff to fill vacancies continued to deteriorate at survey record rates, which suggests that wage pressure will remain a key issue in 2005.

Summary for December 2004
- The reportís unique ëBarometerí continued to record an improvement in Scottish job market conditions during December, the seventeenth successive month that it has done so.

- However, although the rate of improvement remained strong, it was the weakest recorded since March. Moreover, it remained below the average for the UK as a whole for a second successive month.

- Decemberís fall in the barometer principally reflected weakened positive influences from the staff placements and demand for staff components. Pay rates had the same positive effect as in November.

- The staff availability index (which is inverted in the calculation of the barometer) was the only component to have a sharper positive influence on the Barometer in December.

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

ìScotlandís labour market ended 2004 on a positive note, with placements, billings and demand for staff all rising at solid rate. Growth rates were generally more modest though than earlier in the year suggesting the market may be losing a little momentum. Wages growth rates have also eased but low levels of available staff suggests pressure on pay rates is likely to grow in 2005.

Regional analysis
- Permanent staff placements were higher than a month earlier in two of Scotlandís largest cities during December. Placements rose the fastest in Glasgow, though growth was sharp in Aberdeen. Declines in staff placements were recorded in Dundee and Edinburgh.

- Aberdeen recorded the sharpest rise in temp/contract billings of Scotlandís four main cities in November, followed by Glasgow. As with permanent staff placements, Dundee and Edinburgh recorded a fall in temp/contract billings during December.

- Permanent staff availability continued to fall across all four of Scotlandís cities, with the sharpest rates of decline recorded in Glasgow and Edinburgh. Temporary staff availability, which was also down in all four cities, fell at the quickest pace in Dundee.

- Glasgow recorded the sharpest increase in average pay rates during December.

Wages and salaries
- Growth in salary levels awarded to permanent staff remained strong in December, reflecting high levels of competition for suitably qualified staff. However, the rate of inflation of salaries in Scotland remained below the UK average.

- Average pay rates awarded to temporary and contract staff also rose, but the rate of growth was the weakest for five months ñ partly reflecting an easing in the rate of demand for temp staff.

Employment
- Permanent staff placements by recruitment consultancies in Scotland grew for the seventeenth successive month in December. The latest monthly increase was slightly above the average for the UK. However, the Scottish growth rate was the weakest since January 2004.

- A similar trend was displayed by the latest data on temporary staff billings where growth, despite remaining strong and above that for the UK, was the weakest in six months and also below the annual average.

Vacancies
- Although still solid growth, the latest increases in demand for both permanent and temporary staff were the lowest for eighteen months and below the comparable UK averages.

- Decemberís increase in demand for permanent staff was the nineteenth in succession, while demand for temporary/contract staff was up for a twenty-second successive month.

- Despite evidence of an easing in growth rates of the overall demand for staff, the availability of candidates to fill permanent and temporary vacancies continued to fall sharply in December. For both types of employee, availability deteriorated at (or close to) two-year record rates.

Sectoral
- With the exception of Engineering/Construction, recruitment consultancies reported growth of demand for all main types of employee in December. However, in most cases, rates of growth were weaker than in November.

- Once again, the sharpest improvement in demand (for both permanent and temporary staff) was for Nursing/Medical/Care staff.

The Bank of Scotland Labour Market Barometer
- A key tool in the Monthly Labour Market Report is the Bank of Scotland Labour Market Barometer. 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.

- In December, the Barometer recorded a reading above the crucial 50.0 no-change mark for the seventeenth successive month to signal a further improvement in Scottish job market conditions. That said, a second consecutive fall in the Barometer to 58.0, from 58.7, suggested that the rate of improvement was the smallest since March.

- The marginal fall of the Barometer recorded in December principally reflected weaker rates of improvement in staff placements and demand for staff. Pay rates had the same effect as in November, resulting in staff availability being the only component to have a stronger positive influence on the Barometerís performance in December (the availability index is inverted in the calculation of the barometer).

- The Barometer for Scotland remained below the equivalent UK index (compiled from data produced in the Deloitte/REC Report on Jobs) for a second successive month.

- The number of people registered jobless and looking for work in Scotland continued to fall in November. According to the latest data, the claimant count was 89,200, down 900 from October and 9,400 lower than in November 2003. This equates to a jobless rate of 3.4%, which was unchanged for a second successive month.

The number of people registered as jobless and seeking work at UK job centres fell to 833,200 in November, from Octoberís downwardly revised figure of 836,600.

The lowest unemployment rates were found in the South East and South West (1.6% for both regions). Meanwhile, the highest jobless rates remained in Northern Ireland and the North East (3.6% and 3.9% respectively).