- Labour demand continues to cool from historic highs.
- However, hiring conditions remain tough with low unemployment and nearly half a million more workers sitting on the sidelines than pre-pandemic.
- The Chancellor has announced a range of measures to get more people back into the workforce.
- These measures will take time and near-term recruitment challenges aren’t set to disappear anytime soon.
Spotlight: A range of sectors continue to face hiring challenges
Recruitment remains challenging across a range of categories, many of them lower-paid. Indeed data shows that, compared with pre-pandemic, jobseeker interest has fallen most in cleaning & sanitation. Each job posting in that category is now attracting 35% fewer clicks than previously, relative to the average job on Indeed.
Childcare was a big focus on Budget Day, with the Chancellor announcing a major expansion of free childcare provision to working parents. But there are concerns over providers’ ability to meet this demand, as there are serious gaps in the childcare workforce and retaining talent has long been an issue. Relative interest in the childcare category has fallen by 16% versus pre-pandemic.
The categories which have seen the biggest increases in relative interest are software development, information design & documentation, mathematics, media & communications and legal. The remote-friendly nature of these occupations are likely one contributory factor, with searches for remote work on Indeed having risen strongly since the pandemic started to 2.7% of all UK searches in February 2023, a tenfold rise. Another factor is relatively subdued job posting trends in several of these categories, including a sharp slowdown in tech hiring during recent months.
Labour Market Overview
Tackling the UK’s chronic staff shortages was a central plank of the Chancellor’s spring Budget. A range of measures were announced to try and encourage more people back into the workforce, focusing on parents, people with disabilities, those with health conditions and older workers. The Office for Budgetary Responsibility (OBR) expects these to add 110,000 people to the workforce over a five-year period, with the expansion of free childcare for working age parents of 1 to 2-year-olds expected to account for 60,000 of that. However, the childcare changes are being phased over a three-and-a-half year period in recognition of constraints on the ability of providers to meet the additional demand.
Though the rate of economic inactivity dipped to 21.3% in the three months to January, down from a peak of 21.7% six months previously, it remains well up from the 20.2% seen on the eve of the pandemic. That equates to 488,000 more working age people outside the labour force. The latest drop in inactivity was driven by the 16 to 24-year-old age group.
Vacancies continued to soften in February from historic highs, but remain elevated at more than 1.1 million. With the unemployment rate remaining low at 3.7%, the labour market remains historically tight with just 1.1 unemployed person per vacancy.
Indeed job postings signal a continued slowing in employers’ hiring appetite into March, though as of 10 March 2023 still remained 26% above the 1 February 2020, pre-pandemic baseline.
Strong wage growth eroded by high inflation
The tight labour market continues to drive strong nominal wage growth. Regular pay growth remained strong at 6.5% year-on-year in the three months to January, one of the highest rates seen outside the pandemic period. However, high inflation meant that real wages continued to be squeezed, down 2.4% year-on-year.
There remains a gap in pay growth between the private sector (7.0% y/y) and the public sector (4.8% y/y). However, the latest month saw a narrowing of 0.9 percentage points, suggestive of some public sector employers heeding calls for pay rises amid widespread industrial action.
Redundancy notifications edge higher
Redundancy notifications ticked up in February, reaching the highest since November 2020, though remain well below levels seen at the acute phase of the pandemic.
The UK labour market continues to see a gradual cooling, though vacancies are still at elevated levels. The supply picture remains constrained, with inactivity remaining well above its pre-pandemic level despite recent falls. The Chancellor has made inactivity a central focus for policy. But the measures announced in the Budget will take time to have effect and are projected to only close part of the UK’s post-pandemic inactivity gap.
Though the OBR now expects the UK economy to avoid recession, the stagnant growth forecast means the labour market is likely to soften further. But it’s starting from a position of extreme tightness and recruitment challenges don’t appear likely to go away any time soon.
Hiring Lab Data
We host the underlying job-postings chart data on Github as downloadable CSV files. Typically, it will be updated with the latest data one day after this blog post was published.
The Indeed Job Postings Index is a daily measure of labour market activity that is updated and will continue to be released weekly, superseding the Job Postings Tracker. The primary difference between the Indeed Job Postings Index and the legacy Job Postings Tracker is the level. The Indeed Job Postings Index is set to 100 on February 1, 2020, and this effectively provides a uniform level shift of 100 to the existing Job Postings Tracker across all time points.
The Relative Job Seeker Interest metric takes the average number of clicks per job posting for each job category relative to February 1, 2020, divided by national clicks per posting relative to the same time period. Both clicks and job postings are 28-day moving averages of seasonally adjusted data. A positive change means the average job posting in a category is now more attractive to job seekers relative to the average posting than it was before the pandemic. A negative change indicates that the category has lost interest relative to the average posting since February 1, 2020. By construction, the national average across all sectors is zero.
The number of job postings on Indeed.com, whether related to paid or unpaid job solicitations, is not indicative of potential revenue or earnings of Indeed, which comprises a significant percentage of the HR Technology segment of its parent company, Recruit Holdings Co., Ltd. Job posting numbers are provided for information purposes only and should not be viewed as an indicator of performance of Indeed or Recruit. Please refer to the Recruit Holdings investor relations website and regulatory filings in Japan for more detailed information on revenue generation by Recruit’s HR Technology segment.