Salary Growth - Credit Crunch

The REC and KPMG recently published their Report on Jobs which the recruiter reported on. Please find their report below: -

Apparently, salary growth slowed with modest recovery in permanent hires and rise in temporary jobs in March bringing a modest rise in permanent staff appointments while salary inflation eased to its lowest for two and a half years.

Weaker demand for staff and an easing of skills shortages contributed to low wage inflation. Although permanent salaries continued to rise in March, the rate of growth slowed. Inflation of temporary staff pay quickened slightly, but was only marginally above February's 22-month low. Meanwhile, brisk growth of temporary staff appointments suggests that employers continue to favour flexible workforces. Permanent staff placements rose modestly in March, while growth of temporary billings held firm. Recruitment consultants reported a rebound in permanent staff placements in March, following a slight dip the previous month. The number of people placed in permanent roles rose modestly, while anecdotal evidence suggested that the expansion in placements was supported by increased activity levels at client companies. Demand for permanent staff rose across seven of the eight categories of permanent staff monitored by the March survey. The strongest expansion rate was for engineers and construction workers, followed by executive and professional staff. There was higher demand for temporary or contract employees across the board in March. Again, the strongest rate of growth was for engineering and construction, followed by secretarial/clerical. Demand for blue collar staff once again lagged in last place.The knock-on effect of the credit crunch was first seen by the financial services sector, with annual growth of vacancies falling since last summer to a rate of just 2.7% in the three months to February. This is the second lowest in more than two years. Alan Nolan, director at KPMG, said: "The banking crisis is clearly taking its toll on the financial sector. IT and computing are among the sectors where demand for both permanent and temporary staff is weakest." However, fears are growing that jitters in the City will have a knock-on effect on other sectors. Although demand for staff in the engineering and construction sector is still strong, major contractors now worry that the turmoil in the financial markets will result in major office developments becoming casualties of the credit crunch. "No matter what sector, employers are becoming increasingly cautious about the outlook. Demand for staff is slowing and employers are hedging their bets with more emphasis on temporary hires, while pay pressures are easing somewhat. This further evidence of a softening labour market is a green light for an interest rate cut this week." Helen Reynolds, acting chief executive, Recruitment and Employment Confederation, added that the modest rebound in permanent placements suggests the labour market is holding up. She said: "Employers are dealing with the economic uncertainty by keeping close check on salaries, as indicated by permanent staff wage inflation coming in at a two-and-a-half-year low. Currently, the worst effects on the jobs market are being felt in the City, as banks retrench. But demand in other industry sectors such as engineering and construction shows no sign of slowing." However, job losses on the scale of the dotcom crash in 2001 are highly unlikely, Reynolds added.

Should you wish to see the full report, please do contact us on info@ggrecruitment.co.uk.