UK hiring falls at fastest pace in over three years wage growth slows

British employers reduced the number of new permanent staff they hired through recruitment agencies by the most since mid 2020 last month due to concerns about the economic outlook, adding to signs that the market is becoming tougher for job seekers.

A gauge of permanent staff hiring by the Recruitment and Employment Confederation and accountants KPMG fell to 42.4, the lowest since the 34.3 in June 2020 when the country was in lockdown due to the COVID-19 pandemic.

The survey’s measure of temporary staff hiring, which often rises when employers are cautious about the outlook, in July showed the weakest growth in nine months - partly because more workers were looking for the security of permanent roles.

Neil Carberry, chief executive of REC, said the jobs market remained “fairly robust” despite the slowdown in permanent placements.

“To some extend this is normalisation as the post-pandemic boom abates, but it is also driven by uncertainty,” he said.

While starting pay for new permanent staff rose sharply by pre-pandemic standards, the rate of wage growth was the lowest since April 2021, REC said.

Claire Warnes, partner of skills and productivity at KPMG UK, said competition for skilled workers and cost of living pressures were keeping starting salaries high.

Monday’s survey chimed with other indicators showing the labour market is loosening, welcome news for the Bank of England which raised interest rates for the 14th meeting in a row to 5.25% last week and has been concerned about high wage growth.

Official data showed unemployment rose to 4% in the three months to May, a 16-month high, although annual wage growth remained at a record high of 7.3% in cash terms.

Separate figures from accountants BDO showed rising interest rates, tough trading conditions and weak demand hit hiring intentions and business confidence across services and manufacturing sectors.

BDO’s employment index fell for the first time in six months in July and its optimism gauge declined for the first time in four months.

REC said the availability of both temporary and permanent workers to fill jobs hit the highest since December 2020.

House prices fall: British house prices fell in July for a fourth month and the slide looks set to extend into 2024, but the market showed some signs of resilience despite a rise in borrowing costs, mortgage lender Halifax said on Monday.

Prices fell 0.3% from June, adding to similar falls since April, Halifax said.

In year-on-year terms, they were down by 2.4%, a slightly smaller drop than June’s 2.6% decline which was the largest such fall since June 2011.

Britain’s housing market has slowed in the face of a relentless run of interest rate increases by the Bank of England since December 2021 aimed at reining in stubbornly high inflation.

But the decline in house prices has so far been small compared with the surge in valuations during the COVID pandemic.

Average prices remained about 45,000 pounds ($57,250), or 19%, above pre-pandemic levels, according to Halifax.

It said prices were little changed over the last six months and demand from first-time buyers was holding up, with some of them seeking smaller homes to offset higher mortgage rates.

However, the buy-to-let sector appeared to be under pressure, possibly pointing to more homes being put up for sale which could ease a long-standing shortage of properties on the market and weigh further on prices.

Kim Kinnaird, director of Halifax Mortgages, said house prices were likely to continue falling into next year, echoing previous comments by the lender.

“Based on our current economic assumptions, we anticipate that being a gradual rather than a precipitous decline, and one that is unlikely to fully reverse the house price growth recorded over recent years,” Kinnaird said.

A Reuters poll of analysts published in early June pointed to a 3% fall in house prices in 2023 before flat-lining in 2024.

But some economists have pencilled in a bigger fall due to the rise in mortgage rates in recent weeks.

“While house prices are proving relatively resilient so far, the significant rise in mortgage rates is set to cause a renewed slump in demand, while previously tight supply conditions are easing,” Imogen Pattison, with Capital Economics, said.

“As a result, we expect house price falls to accelerate in the second half of the year. This should leave house prices 10.5% below their peak on the Nationwide measure.”

Nationwide, another mortgage lender, said last week its index of house prices

fell by the most.

Separately, LSL Property Services said on Monday it now expected the group’s annual profit to be “substantially lower” than previously forecast due to subdued activity in the British mortgage market.

The British housing sector is in the middle of a pronounced slowdown, as high mortgage costs and tight credit conditions eat into demand.