The latest quarterly findings reveal continuing high employment but also slow wage growth and further challenges for recruitment on the horizon
The quarterly Labour Market Outlook, produced in partnership with the The Adecco Group UK & Ireland is one of the most authoritative employment indicators in the UK and provides forward-looking labour market data and analysis on employers’ recruitment, redundancy and pay intentions.
The Adecco Group UK&I and its brands are part of the Adecco Group, the world’s leading HR solutions partner. As a Group, we provide more than 700,000 people with permanent and flexible employment every day. With more than 34,000 employees in 60 countries – 3,100 in the UK&I – we transform the world of work one job at a time. Our colleagues serve more than 100,000 organisations with the talent, HR services and cutting-edge technology they need to succeed in an ever-changing global economy. As a Fortune Global 500 company, we lead by example, creating shared value that meets social needs while driving business innovation. Our culture of inclusivity, fairness and teamwork empowers individuals and organisations, fuels economies, and builds better societies. These values resonate with our employees, who voted us number 2 on the Great Place to Work® - World’s Best Workplaces 2017 list. We make the future work for everyone.
The Adecco Group is based in Zurich, Switzerland. Adecco Group AG is registered in Switzerland (ISIN: CH0012138605) and listed on the SIX Swiss Exchange (ADEN). The Group is powered by eight lead brands: Adecco, Modis, Badenoch & Clark, Spring Professional, Lee Hecht Harrison, Pontoon, Adia and YOSS.
The Adecco Group UK&I’s head office is located in London, UK. We have 11 brands, including the Adecco Group UK&I, Adecco, Adia, Ajilon, Badenoch & Clark, Modis, Office Angels, Penna, Pontoon, Roevin and Spring.
Labour Market Outlook: Summer 2018
The Labour Market Outlook for the third quarter of 2018 is based on survey responses from 2,001 employers across the UK.
In addition to providing a general picture of market trends, the findings will also have important significance for employers and HR. For the first time, the CIPD has created dedicated guidance to accompany the report, with recommendations on how to frame a practice response to best capture surfacing opportunities and mitigate potential risks.
Download the report and practitioners' guide below:
Gerwyn Davies, CIPD Senior Labour Market Analyst, gives a concise round-up of the key findings from this quarter's Labour Market Outlook.
Summary
The data and analysis from this quarter’s LMO reveals a picture of continuing high employment but also stagnating pay expectations and shrinking labour supply. Taken together with the UK’s persistent, weak productivity and uncertainty over Brexit, the evidence points to sluggish wage growth and continued recruitment difficulties in the year ahead. To combat these, policy makers and employers alike need to focus on raising workplace productivity, especially through investment in skill development and supporting better line management capability.
Employers should encourage not just harder working but smarter working, and government must ensure that its post-Brexit immigration policy enables employers to acquire the skills and labour they need, including in low-skilled roles.
Employment
The demand for labour in Q3 2018 will remain robust. This quarter’s net employment balance, or the difference between the proportion of employers who expect to increase staff levels and those who expect to decrease staff is at +23. This is consistent with official labour market data, which show that employment has increased sharply in recent months.
Labour supply
With high employment and strong labour demand, there is tightening pressure on recruitment which is not helped by falling labour supply. The median number of applicants per vacancy across all skill levels have plummeted. For each low-skilled role, the number has fallen from 24 in Summer 2017 to 20, for medium-skilled roles from 19 to just 10, and for high-skilled vacancies from 8 to 6.
Among the factors is the dramatic (95%) fall in net EU migration, which according to the latest official data, dropped to just 7,000 between Q1 2017 and Q1 2018, compared with 148,000 from the year before. This also coincided with an overall fall in youth population the past year.
Given the restraints, the prevalence of hard-to-fill vacancies continued to rise. Among employers who currently have vacancies, 66% report that at least some of their vacancies are proving hard-to-fill, higher than in Spring 2018 (61%) and Spring 2017 (56%). Organisations with hard-to-fill vacancies report that the density of these vacancies is higher in their organisation now (40%) compared with three months ago (30%).
Wages
A potential outcome of the reduction in supply across most sectors of the economy is stronger wage growth. However, while this has been the case for many key staff and new hires, the outlook for wage growth remains relatively subdued for large parts of the UK workforce, as median pay rise expectations hover at 2%.
Persistently weak productivity is constraining firms’ ability to offer higher wages, alongside other factors such as costs associated the National Living Wage, the Apprenticeship levy and the Government’s auto-enrolment pension scheme. The uncertainty around future trading arrangements with the EU also seems to be dampening wage growth for a minority of employers.
