Jobs Outlook: UK unemployment rate remains at record lows and skills shortages are still a key problem for the economy

Thursday, January 12, 2023

UK unemployment rate continues to remain at record lows and skills shortages are still a key problem for the economy. Business confidence in relation to the economic outlook is at record lows as hiring and investment plans are shelved. Labour shortages are significantly holding back growth, adding to inflation and leading to poorer living conditions across the country.

Neil Carberry, Chief Executive of the REC, said: “This month’s data emphasises that while employers are moderately more cautious in the face of economic uncertainty, this is not yet a major slowdown in hiring. While permanent recruitment activity has dropped from the very high levels of earlier in the year, the pace of that drop has tempered this month.

“In contrast to the national trend, temporary hiring slowed in the North in the run-up to Christmas. Temporary vacancies however ramped up as businesses favour short-term workers in the current economic climate.

“The main way to boost performance is to unlock growth by businesses putting their people planning first, as a strategic way to enhance productivity. Government can help through skills and immigration reform. Boosting growth is the only way to ensure a prosperous country for all of us.”


Candidate availability

Recruitment agencies in the North of England recorded a sharp drop in permanent staff supply extending the current sequence of worsening supply to 22 months. In addition to this, it was the sharpest deterioration of the monitored English regions. In contrast, temporary candidate numbers rose fractionally for the first time since February 2021.

The Institute of Employment Studies highlighted a worrying statistic that the UK is one of the only five developed economies where employment remains lower now than it was before the pandemic.

The REC reported that between June and August 2022, around 2.5 million working-age adults were out of work because of long-term sickness, up from around 2 million in spring 2019. Reinforcing the fact that candidate supply has continued to fall sharply, and businesses are still struggling to fill their vacancies.


Business confidence

According to the REC’s latest research, in September to November 2022, business confidence in the UK economy fell to record lows with the barometer in negative territory for over 13 months.

Employers are still recruiting, but without available candidates, vacancies have been left open for longer. A recent report from the Resolution Foundation found that on average, it is taking businesses almost two months to fill vacancies.


Pay pressures

Both permanent and temporary wages increased during Q4 of 2022 with the latter seeing a considerable rise with the North of England reporting the quickest increase in short-term pay rates across the UK.


Demand for skills

Skill shortages highlighted across permanent placements were accounting/financial, engineering, professional (marketing, HR, legal), IT and healthcare. Temporary staff skills shortages included the same as above but also construction, hospitality and administration.


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