Unemployment falls to its lowest level for 40 years as recruitment difficulties surface

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There has been an array of good news statistics produced this week for the UK economy.

Unemployment fell by 65,000 between April and June 2018 to 1.36 million, the lowest for more than 40 years, official figures show.  The unemployment rate is now 4% and is the lowest since 1974/5.

Productivity was also up by 0.4% during the same period, however wage growth remained virtually the same.

Average weekly earnings, excluding bonuses, rose by 2.7% – unchanged on the month before and is now more than the current inflation rate of 2.4%.

Real wages however grew by just 0.4%, according to the Office for National Statistics (ONS). This was a slight drop on last month’s 0.5% figure.

The data also showed a “substantial fall” in the number of people on zero-hours contracts. Some 780,000 people were on such contracts in their main job in the second quarter – 104,000 fewer than for a year earlier.    It is unclear what the reason is for the fall in zero hours contracts and whether recent adverse publicity is diminishing their appeal to workers.

Notwithstanding this good news two in five employers are now finding it difficult to get the staff they need and many have reported receiving fewer applications from suitable candidates according to the CIPD.  They cite a drop in the number of applications across all roles, forcing many employers to increase starting salaries, and for other staff to try and attract and retain them.

There has been a marked reduction in applications across low-skilled, medium-skilled and high- skilled vacancies.

It is not clear what is causing the difficulties in recruitment and many are blaming BREXIT and the drop in EU nationals coming to work in the UK over the past year.

Figures from the ONS for example show that the number of EU nationals coming to work in the UK increased by only 7,000 between the first quarter of 2017 and the first quarter of 2018.  This compares with an increase of 148,000 in the previous year from the first quarter of 2016 to the first quarter of 2017.

This has led to increasing recruitment and retention challenges for many employers, especially those who have relied heavily on EU nationals to fill roles and also has meant that some have started to increase starting salaries and also for existing staff where there are retention issues.

In terms of sectors the Transport and Construction sector expect the largest growth in headcount in the near future in relation to new recruitment followed by business services.

Confidence in expansion was strongest in London and the South West and the lowest was in the North East of England and the West Midlands.

As BREXIT looms with the prospect of no deal scenario increasing it looks increasingly likely that recruitment could become more of a challenge for all employers.

If you require any advice relating to the recruitment of staff or the growth of your business then contact Steven Eckett our Head of Employment and Senior Associate. seckett@meaby.co.uk

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