UK job market remained buoyant in March. Skill shortages continued to drive sharp pay inflation

The Report on Jobs, published today by the Recruitment & Employment Confederation and Deloitte, provides the most comprehensive guide to the UK labour market, drawing on original survey data provided by recruitment consultancies and employers, as well as data on national newspaper recruitment advertising.

The latest REC/Deloitte Report on Jobs showed that recruitment consultantsí permanent staff placements and temporary staff billings were up for the twenty-second consecutive month in March, at robust rates. Demand for staff again showed a marked improvement, despite growth easing slightly to a fifteen-month low. Consultancies reported that demand for all main categories of employee was higher than one month ago. Meanwhile, overall candidate availability fell for the seventeenth consecutive month, with the rate of deterioration slightly sharper than in the previous month. Pay inflation picked up to the strongest in three months, reflecting strong demand for staff and shortages of suitable candidates to fill vacant positions at employers.

Commenting on the latest report, Ashley Unwin, partner in the Human Capital practice at Deloitte said:
Many companies taking on new staff this month have reported that recruitment is needed to maintain productivity. However, the current recruitment rush could lead to less thorough screening of candidates as pressure builds as well as contributing to unsustainable pay inflation. In the drive for productivity, companies need to consider the impact of short-term recruitment on their longer term growth and talent mix.

Also commenting on the latest report, Gareth Osborne, Managing Director at REC reported that:
The fact that recruitment activity for both temporary and permanent placements has now increased continuously for twenty-two months confirms that the UK jobs market is the most dynamic within the EU. At the same time, the latest figures show that skills shortages are continuing to have an impact on UK business and are putting more and more onus on recruitment providers to come up with pro-active and innovative measures for attracting suitable candidates. In the longer term, it is essential that the Governmentís Skills Strategy helps to create a larger pool of skilled workers.

Growth of permanent staff placements and temporary staff billings remained robust
Marchís Report on Jobs survey revealed further solid growth of recruitment activity. Permanent staff placements rose for the twenty-second successive month, with the rate of expansion picking up slightly following four previous months of easing growth. Temporary staff billings were also up for the twenty-second consecutive month, with growth remaining robust, albeit the least marked since July 2003. Consultancies reported that strong demand for both permanent and temporary staff had driven the latest expansions.

Actual employment up moderately
Actual private sector staffing levels rose at a moderate pace in the latest survey period, according to the CIPS/NTC Research Employment Index. Following Februaryís sideways movement, Marchís expansion in workforces reflected sharper growth in service sector hiring, combined with a return to growth of manufacturing sector employment for the first time in four months. Construction again registered the most marked rise in employment of the three main sectors, despite growth easing to the slowest in seven months. In the majority of cases where higher employment was reported, rising levels of business activity at firms was indicated as the main reason.

Strong improvement in demand for staff
Although the Report on Jobs Vacancies Index fell fractionally in March, to a fifteen-month low, it still pointed to a marked rise in demand for staff. Demand for both permanent and temporary staff grew at strong rates, with all categories of employee registering a rise in demand from the previous month. Among permanent staff, Hotel & Catering staff recorded the greatest improvement in demand, while for temp staff, Engineering/Construction staff saw the most marked rise in demand.

National press recruitment advertising in the UK was up 2.7% on the same period a year earlier in March. However, the Press Recruitment Advertising Index showed a slight deceleration in the annual rate of growth from January.

Sharp fall in candidate availability...
The overall availability of candidates to fill positions at employers continued to deteriorate at a sharp pace in March. Both permanent and temporary staff availability declined at faster rates than in the previous month.

...drove pay rates up strongly
The scarcity of suitable candidates, a product of the tight labour market and ongoing skill shortages, contributed to a further round of sharp pay inflation. Consultancies again reported higher pay rates for both permanent and temporary staff.