Vacancies for permanent jobs in the UK declined at their fastest pace for four years last month, according to a new survey that adds to the gloomy economic mood.
Amid febrile markets and weak economic data, the monthly jobs report from the consultancy KPMG and the recruitment firm REC shows many firms reluctant to hire.
The employer survey suggested vacancies for permanent roles had declined at the fastest pace since August 2020, when the UK was in the grip of the Covid pandemic. Temporary vacancies also fell in December.
The labour market was slowing for much of 2024. December was the 14th month in which the jobs report registered a decline in overall vacancies.
Among permanent roles, the fastest decline in vacancies was seen in the executive/professional and the IT and computing sectors.
Some employers, particularly in hospitality and retail, have said the government’s £25bn increase in national insurance contributions (NICs), which will come into force in April, will depress hiring.
Jon Holt, the KPMG group chief executive, said: “As we start the new year, it’s a muted one for the UK jobs market. The hiring market could continue to show signs of caution in the short term, as businesses pause to take stock of higher employment costs, a more gradual pace of interest rate cuts and rising inflation.”
However, he suggested the situation could improve in the coming months. The survey found wage inflation is continuing to increase, at its fastest pace since August 2024, showing there is still demand for workers.
“As 2025 progresses and UK economic growth picks up, businesses will need new talent. Salary inflation being at its steepest in four months shows they are still willing to compete for it,” Holt said.
Policymakers are watching closely to see how the increase to employers’ NICs – the main revenue raiser in Rachel Reeves’s October budget – affects hiring and inflation in the coming months. The Bank of England said last month that government policy decisions had created “additional uncertainties” around the economic outlook.
after newsletter promotion
Meanwhile, a new year bond sell-off in financial markets, which pushed the yield on 10-year government bonds above 4.8%, its highest level since the global financial crisis in 2008, has fuelled fresh concerns about the health of the public finances.
The Office for Budget Responsibility (OBR) is preparing a new economic forecast, to be published on 26 March. The chancellor will have to respond to the OBR’s projection – and may be forced to cut spending if the report suggests she is likely to break her self-imposed fiscal rules.
The latest inflation data will be published next week.