Market Analysis

Recruiters reported that last month witnessed the slowest growth in starting salaries for permanent staff in over three years, accompanied by a significant decrease in spending on temporary workers, according to a report released on Monday by the Recruitment and Employment Confederation (REC). 

These findings add to the mounting evidence indicating a deceleration in Britain's job market.

The March survey by REC suggests that there might be easing underlying pay pressures in the economy, which could help persuade policymakers at the Bank of England (BoE) that inflation will remain around its 2% target. 

Official figures have shown that pay growth has been running at an annual rate of approximately 6%, a rate that is considered double the pace most BoE officials believe is consistent with achieving the inflation target.

Neil Carberry, Chief Executive of REC, emphasized that the data supports the argument for the BoE's Monetary Policy Committee to consider a more relaxed approach to fostering growth in the near future. He pointed out that pay growth has notably decelerated, dipping below the survey's long-term average for new permanent roles.

However, the BoE has been cautious about relying too heavily on REC data lately, as trends observed in the recruitment market have not always translated swiftly into lower wage growth across the broader workforce. 

A recent BoE survey of employers indicated that firms anticipate raising pay by 4.9% over the next 12 months.

Financial markets are anticipating rate cuts by the BoE, with expectations suggesting cuts may begin in June or August, with approximately 0.75 percentage points of cuts already priced in for 2024.

REC also highlighted that overall demand for staff declined for the fifth consecutive month in March, nearly matching the drop seen in February, which marked the steepest decline in over three years. The downward pressure on pay was attributed to a surplus of candidates in the market, partly due to increased redundancies.

REC's data is based on a survey conducted among approximately 400 recruitment agencies between March 12 and March 22.

Paraphrasing text from "Investing" all rights reserved by the original author.