Week in Business: Is the jobs market in crisis?

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The chief of one of many UK’s greatest recruitment platforms says the roles market is about as unhealthy as he’s ever seen – official knowledge paints an advanced image – so what’s happening?

First up, let’s have a look at the numbers, and the headline unemployment determine – 4.6 per cent – the best it’s been for 3 years.

Earlier than the pandemic it was round 3.8 per cent – spiking throughout Covid earlier than falling to round 3.5 per cent by the center of 2022.

Since then, with loads of peaks and troughs, the speed of unemployment has been trending increased and we all know that the beginning of this 12 months was fairly fragile, culminating in a lack of greater than 100,000 payrolled staff in Might. There are actually round 270,000 fewer payrolled staff than this time final 12 months. 

In the meantime the official employment price has remained regular – this appears contradictory, and it’s, however it may be defined by an increase in financial inactivity – people who find themselves not actively in search of work – that features the retired, college students and people on illness advantages. These folks don’t depend as unemployed. 

It’s additionally the case that most of the individuals who have not too long ago misplaced a job and are actually in search of one other one aren’t but counted as unemployed.

Writing in Metropolis AM this week, James Reed – CEO of Reed recruitment, identified that the variety of vacancies is falling, and falling quick.

If the unemployment price rises – that’s the variety of folks in search of work – whereas the variety of vacancies within the jobs market falls – effectively, I don’t should spell that out.

As Reed wrote, “official statistics present 35 consecutive durations of decline. Subsequent month, it will likely be three years, with vacancies falling from a peak of round 1.3m then to 761,000 now.”

He says his personal enterprise has seen a 25 per cent fall in marketed vacancies 12 months on 12 months. He says that in all his a long time working in recruitment he has by no means seen something like this.

The UK is now the one developed nation to have job postings stay beneath pre-pandemic ranges.

After the 2008 monetary disaster, vacancies declined for 16 months then they began to return. Employment was really a uncommon vivid spot within the UK economic system throughout the next years of ‘austerity’ and belt-tightening. We’ll come again to that.

Graduate jobs massacre

Let’s have a look at some explicit elements of the labour market. Let’s have a look at graduate jobs.

Jobs web site Certainly revealed this week that graduate jobs are at their weakest degree since a minimum of 2018 – down 12 per cent in comparison with a 12 months in the past.

There’s a giant debate in regards to the worth of a level and the type of graduates we’re producing however that’s a wider problem – I wish to deal with the numbers, and so they’re not fairly.

Not solely are there fewer graduate jobs on supply however there are additionally extra graduates chasing them – the variety of college leavers climbed from 830,000 within the 2018/19 educational 12 months to only over 1m in 2023/24.

Competitors for graduate jobs has by no means been harder as employers ease off taking over new recruits.

Contemplate the likes of the Large 4 accountancy and consulting giants – Deloitte, EY, KPMG and PwC – historically these corporations would hoover up graduates however not any extra. They’re reducing jobs and pulling again sharply on graduate recruitment. And guess what? 

They’re increasing their use of AI, as James O’Dowd of government search agency Patrick Morgan explains: “The Large 4 are taking a look at AI very critically to copy junior work extra cost-effectively.”

They’re additionally increasing their offshoring efforts – creating cheaper jobs in locations like India and the Philippines. And so they’re not alone on this.

Metropolis AM reported not too long ago on the rising variety of companies recruiting distant employees in cheaper international locations comparable to South Africa in a direct bid to keep away from the elevated price of using folks within the UK.

And right here we get to the nub of the issue. 

Nationwide Insurance coverage hike

Why is that this occurring? Why is unemployment rising? Why is the variety of vacancies falling? Why are corporations pushing aside headcount growth and shunning graduates? 

Properly, numerous causes – one in every of which is that authorities tax adjustments have made it dearer to rent folks, and incoming adjustments to employment regulation will make it extra difficult and better threat. 

If you happen to improve the price of one thing – on this case, jobs – you’ll get much less of it. 

I discussed earlier that employment was a shocking vivid spot of the Cameron/Osborne period – and it was – largely because of the UK’s versatile labour market. Employers may rent with relative confidence.

That confidence doesn’t exist any longer. 

The economic system is bruised – from Trump’s tariffs and international headwinds sure, after all, however the improve to nationwide insurance coverage added insult to harm and the looming Employment Rights Act with its pages and pages of employment purple tape – is sufficient to make any employer suppose once more earlier than recruiting.

AI, automation, cost-cutting, these are the logical responses to a scenario the place employers don’t have the arrogance to create jobs. 

AI is coming for skilled roles

However technological change is the undercurrent right here. 

Entry degree jobs have fallen 32 per cent since ChatGPT’s industrial breakthrough in 2022. 

James Reed says he’s deeply involved about it, warning that we could also be “going right into a interval of very substantial disruption within the UK jobs market over the subsequent 5 years, not dissimilar to what occurred within the Nineteen Eighties for lots of blue collar employees, besides this time it’s white collar jobs which can be being affected.”

That may be a problem for everybody – from colleges and universities to employers and authorities – however it’s a problem made tougher and extra pressing by coverage selections which have hit the roles market exhausting even because it tries to adapt to the structural adjustments. 

Not all crises include an explosion – some are gradual, drawn out, they will creep up on you – and that’s the type of disaster that many now concern is gripping the roles market.