UK jobs market losing steam as economic uncertainty rises – business live | Business


Key events:

All four English regions monitored by KPMG and REC saw a slowdown in permanent job placements, with the North of England only seeing a fractional upturn.

London saw the sharpest increase in temporary jobs in June, while the softest expansion was registered in the Midlands.

UK wage growth
Starting salary inflation eased to the softest since
August 2021, while temp wage growth edged down to a 12-month low.
Photograph: Graeme Wearden/KPMG/REC

Starting salaries continued to climb last month, KPMG and the REC’s UK jobs report shows.

The shortages of skilled candidates forced firms to lift their starting pay — good news for workers looking for help in the cost of living squeeze.

Pay pressures did moderate slightly, though, with starting salary inflation edging down to a ten-month low. That could ease the Bank of England’s worries of a wage-price spiral breaking out.

The report says:

The ongoing imbalance between the supply and demand for workers drove further steep increases in rates of starting pay during June.

Though sharp and well above the series average, the rate of starting salary inflation eased to the softest since August 2021, while temp wage growth edged down to a 12-month low.

Introduction: UK jobs market loses steam

Good morning, and welcome to our rolling coverage of business, the world economy, the financial markets and the cost of living crisis.

The UK’s employment market is losing steam, in a sign of the challenge that will face the next government to strengthen the struggling economy.

British employers slowed their hiring through recruitment agencies again in June, with vacancies rising at the weakest rate in over a year.

The slowdown is due to rising economic uncertainty, spiralling costs, and a shortages of candidates, according to UK Report on Jobs, from KPMG and the REC (Recruitment & Employment Confederation).

The survey shows that permanent staff appointments and temporary positions both expanded at the softest rates for 16 months in June, as the labour market lost some strength.

UK jobs report
UK jobs report Photograph: KPMG and REC

Recruiters also reported another steep fall in overall candidate availability.

That’s partly due to a drop in foreign candidates…. and a reluctance to switch jobs in the current climate, as the so-called Great Resignation fizzles.

Recruitment consultancies often attributed lower candidate numbers to a generally low unemployment rate, fewer foreign workers, robust demand for staff and hesitancy to switch roles in the increasingly uncertain economic climate.

The report follows a slowdown in May….

….and shows we are past the peak of the “post-pandemic hiring spree”, as Neil Carberry, chief executive of the REC, explains:

That pace of growth was always going to be temporary – the big question now is the effect that inflation has on pay and consumer demand over the course of the rest of the year. Whether we will see the market settle at close to normal levels, or see a slowdown, is unpredictable at this point.

“Part of the reason for unpredictability in the market is a slower economy accompanied by severe labour and skills shortages. These are already proving a constraint on growth in many firms. The government should be thinking about how to ensure all its departments enable greater labour market participation and encourage business investment funds to help address this.

Also coming up today

After recovering on Thursday, the pound is hovering around $1.20 as the City waits to see who will emerge to succeed Boris Johnson as Prime Minister (a process which could take a few months).

There could be paralysis in the aftermath of yesterday’s dramatic resignation announcement, with Johnson promising no major policies, tax decisions or other changes of direction during his caretakership.

Daniele Antonucci, chief economist & macro strategist at Quintet Private Bank, says:

A Conservative leadership election is likely to begin within days. While his resignation could add to near-term uncertainty, so far the market response has been fairly muted.

Looking further out (past the current loss of growth momentum), the UK economy and its financial markets could perhaps benefit from more certainty.

Eleswhere, Britain’s competition watchdog, the Competition and Markets Authority, should be releasing its report into the fuel retail market today, following a request by Business Secretary Kwasi Kwarteng.

The latest US jobs report, June’s non-farm payroll, is expected to show that job creation slowed last month.

Economists predict the NFP will rise by 268k, down on the 390k US jobs created in May. A weak reading could lead to more worries about a possible US recession.

Strong odds for an economic data surprise tomorrow from non-farm payrolls. Consensus expects 0.17% monthly growth in payrolls, while the yearly and quarterly trends are running above this estimate. Our positioning runs the risk of a surprise here, so important to watch:

— Prometheus Research (@prometheusmacro) July 7, 2022

GOLDMAN SACHS: “We estimate nonfarm payrolls rose 250k in June, somewhat below consensus of +268k … We estimate an unchanged unemployment rate at 3.6%—in line with consensus—reflecting a solid rise in household employment offset by a 0.1pp rise in labor force participation”

— James Pethokoukis (@JimPethokoukis) July 8, 2022

European stock markets rallied yesterday, but are on track for a subdued open today.

The agenda

  • Morning: CMA expected to release report on UK motor fuel market
  • 9am BST: Italian industrial production for June
  • 12.55pm: ECB president Christine Lagarde takes part in a session at the Les Rencontres Economiques event in Aix-en-Provence, Franc
  • 1.30pm BST: US non-farm payroll jobs report for June

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