UK employers turn cautious on hiring as recession fears mount
British wage growth and hiring activity fell in October, as the prospect of a recession prompted fresh caution among employers and cooled the job market.
Starting salaries grew at the slowest rate in 18 months and the number of people placed in jobs fell for the first time since February 2021, according to a report by KPMG and the Recruitment and Employment Confederation (REC).
The news will be welcome by the Bank of England, which for months has been raising interest rates and urging businesses to exercise wage restraint to help keep a lid on inflation.
Britain is almost certainly already in recession due to the squeeze on incomes, with policymakers expecting the economy to keep shrinking throughout next year and possibly into 2024.
“The looming recession is clearly impacting the UK jobs market,” said Claire Warnes, partner and head of education, skills and productivity at KPMG.
Heightened economic uncertainty had led some clients to “reassess the recruitment plans, while candidate shortages also dampened hiring”.
The frenzied hiring seen in recent months waned across both the public and private sectors. Vacancies remained high, but the pace of growth continued to moderate.
The Bank of England sees the tight British job market as a potential precursor to a wage-price spiral that keeps inflation elevated well above the 2 percent target.
A sharp drop in the size of the labor force is a key reason why companies have been forced to pay up for staff.
Staff availability continued to fall in October, the survey found, with many reluctant to jump ship due to concerns about the economic outlook.
“Activity, overall, is still well in advance of pre-pandemic levels,” said Neil Carberry, chief executive of the REC.
“We will need to watch how this story develops over months to come, but so far, this data suggests heightened employer caution, not a retreat from the market.”