The past three years have been a wild ride for anyone working in the recruitment industry. The Covid pandemic has ripped up the industry, first causes a halt on openings before the reopening of the economy led to a jobs boom, with record vacancy rates and low levels of unemployment.
Last year, James Reed, chair and CEO of recruitment company Reed, described the situation as “unlike anything I’ve ever seen”. The number of businesses advertising on its site soared and the company’s profits doubled. However, there are signs that the previously buoyant jobs market could be taking on water.
The UK’s unemployment rate rose to 3.6% in the three months to September, up from 3.5% the previous quarter, according to the latest labour market statistics from the Office for National Statistics (ONS). Meanwhile, the number of vacancies fell to 1.23 million – a decrease of 52,000 compared to the previous three months.
Although the changes are relatively small, there are concerns this could signal a turning point as Britain slips into recession. The Office for Budget Responsibility today (17 November) warned of recession, forecasting that the UK economy will shrink by 1.4% next year as growth is weighed down by inflation.
Reed agrees that the current outlook does not look rosy for employers or employees. “The economic data at the moment suggests there’s probably a recession going on right now. I wouldn’t be surprised if the last two quarters of this year showed negative growth,” he says.
I don’t want to give the impression it’s all doom and gloom. I don’t feel that at all
But looking at his company’s recruitment data, there remains cause for optimism. At the start of November, the total number of candidates making applications on the jobs site was up 7.4% on the same week last year. Similarly, the total number of applications made in that week was up 9.6% on the previous and the number of jobs posted had risen 7.6%.
“Who would have thought that would be the case?” Reed asks. “The current news can become a self-filling cacophony of negativity, whereas the data suggests that it’s a lot more complicated and nuanced. It’s not as bad as it might first appear.”
In spite of a small drop off, the number of vacancies remains high following a period of unprecedented growth and the labour market is still at historically tight levels, with the one person unemployed per open vacancy.
“Last year, the big surprise was the jobs boom and the number of new openings,” Reed says. “And it’s surprising now, in a recession, that those job numbers are still high. It suggests it’s a different kind of recession.”
A different kind of recession
After 25 years as CEO, Reed has been through a number of recessions while at the helm of a business. But he is yet to experience one where decline in economic growth has coincided with a high number of job openings.
He suggests that, rather than there being a wave of mass sackings as seen recently at Twitter and Meta, the majority of people will experience the recession in their wage packets. Instead of witnessing “influxes of applicants who have been made redundant”, Reed says job hunters on his company’s site are more likely to be trying to find better paid jobs to “improve their circumstances in an economy where real wages are being squeezed”.
It’s good that there’s not mass unemployment like there was in the 1980s and early 1990s. But it’s bad that everyone working is seeing their real earnings squeezed as much as they are
Salaries on the jobs site have increased by 7%, on average, but have not risen enough to keep up with inflation, which now stands at 11.1%. This is matched by findings from the ONS that show a 2.7% fall in wages, once adjusted for inflation, despite regular pay rising at its fastest rate in more than 20 years.
“It’s good that there’s not mass unemployment like there was in the 1980s and early 1990s. But it’s bad that everyone working is seeing their real earnings squeezed as much as they are,” Reed adds.
There are some industries and sectors bucking this falling wage trend. According to Reed’s records, wages in financial services, insurance, recruitment and technology are keeping pace with – or even exceeding – rampant inflation. This suggests that, for now at least, some companies are willing to pay a premium for people with the right skills.
Reed has noticed this at his own company, with recruitment remaining buoyant. He also says Reed is “practising what it preaches” when it comes to offering pay rises and providing one-off bonuses to staff.
“We’re a family company, we want to look after everybody as best we can and support them through this cost-of-living situation,” he adds.
A two-speed workforce
The picture is different in the public sector, where it looks likely pay will be frozen or growth much lower than inflation as the treasury attempts to balance the books. This could lead to what Reed describes as a “two-speed workforce”, where certain individuals are well remunerated while others see their spending power shrink.
“That’s likely to result in more strikes, more industrial action and all sorts of unhappiness in the workplace,” he adds. “A lot of companies are under pressure to increase wages but can’t necessarily do so, especially if they’ve got a lot of debt in their business because the cost of financing that debt has gone up.”
It’s hard to predict how the current situation will develop, as several global factors, such as the war in Ukraine and energy prices, could conspire to make matters worse. But, while Reed expects next year to be tough, he remains optimistic.
“There have been a lot of new businesses started over the past couple of years and there’s a lot of entrepreneurial energy across the country,” he says. “I don’t want to give the impression it’s all doom and gloom, I don’t feel that at all.”
