“The UK labour market continues to cool, with job vacancies and wage growth steadily declining,” said Jack Kennedy, senior economist at hiring platform Indeed, speaking to HR magazine.
“While recent forecasts suggest a modest improvement in the UK’s growth outlook, the labour market faces several challenges in 2025 so employers are expected to remain cautious with their hiring approach, impacting workforce planning and recruitment strategies.”
Vacancies decreased for the 28th consecutive period in August to October, by 35,000, but remained above pre-Covid-19-pandemic levels.
Wage growth continued to decline, with annual growth in real terms for regular pay at 1.9% in July to September 2024 and total pay at 1.4%.
Separate research by the Recruitment and Employment Confederation (REC) and KPMG, published on 8 November, showed that permanent salary growth reached its lowest level since February 2021 in October.
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The UK economy and global politics impacted employers’ recruitment and renumeration strategy, according to Jim Moore, employee relations expert at HR consultancy Hamilton Nash.
He told HR magazine: “Employers have got their heads full this month trying to deal with mixed signals from a triple whammy of the Budget, Trump’s re-election and a fall in interest rates.
“This data shows us the calm before the storm, and it’s a picture we’ve got used to over the past year: shrinking job vacancies and high economic inactivity rates.
“But we’re still waiting to see the Budget’s effect on businesses, with the hospitality and care sectors facing difficult choices as the cost of hiring employees increases.
“This month’s fall in interest rates is a glimmer of hope for businesses.”
Employers should not lose hope, however, as wage growth remained above the rate of inflation, Ben Keighley, co-founder of AI recruitment platform Gaia, told HR magazine.
He said: "These headline figures do not paint the full picture and there are reasons to be optimistic. Wage growth is still outpacing inflation and this is not only good news for workers, but for businesses and the UK economy too."
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While the employment rate increased in the latest quarter, to 74.8%, unemployment also increased to 4.3% in July to September, up on the quarter and the year, the ONS estimated.
The economic inactivity rate declined in the latest quarter and in the year, to 21.8%.
There was also a lower demand for workers in October, according to the REC, as the increase in worker availability increased for the 20th consecutive month. The rise in temporary worker availability was the sharpest increase recorded since December 2020.
Smaller businesses with tight budgets should focus on developing their existing employees to remain competitive, Moore added.
He continued: “Businesses on wafer-thin margins face an existential threat if they can't absorb increased costs or compensate with increased prices.
“It’s still a challenging time for businesses, with the costs of staff suddenly the biggest concern for many small company owners.
“Small businesses should focus on reviewing their staffing models and exploring whether upskilling existing employees might be more cost-effective than new hires. They should also look carefully at their retention strategies – in this market, keeping good staff is often cheaper than recruiting replacements."
