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UK workforce

Pay inflation peaks as the labour market cools: Skills crisis set to intensify

UK employee optimism at odds with economic slowdown.

Content Insight

More than half of workers surveyed feel confident in their job security.
Economists predict a stagnant picture for economic growth in 2024.
69% of businesses feel confident in their growth prospects for 2024.

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Pay inflation experienced over the last year by the UK workforce may have peaked – but economists predict a stagnant picture for economic growth in 2024 – but staff confidence remains high amid the growing skills crisis.

This is according to the latest Robert Half Jobs Confidence Index (JCI) – an economic confidence tracker produced in partnership with the Centre for Economics and Business Research (Cebr).

More than half (58.4%) of workers surveyed feel confident in their job security for the next six months amidst low unemployment, high vacancies and nominal wage growth outpacing inflation. This is a long-standing trend as employees see skills shortages as a reason to feel secure in their jobs, with the JCI’s job security confidence pillar the strongest positive driver for the Index’s overall score for eight consecutive quarters.

Unemployment is expected to ramp up slightly as high-interest rates continue to push down on consumer and business demand, feeding through to employment and yet the labour market will remain tight

However, this optimism contradicts the UK’s economic slowdown, the overall picture of confidence remaining strong and in line with Cebr projections for the labour market over the next six months. Unemployment is expected to ramp up slightly as high-interest rates continue to push down on consumer and business demand, feeding through to employment and yet the labour market will remain tight by historical standards. The 5.5% increase in job search confidence to 47.4% in Q3 2023 may exacerbate the labour challenges for firms in 2024 – if workers are highly confident about their ability to progress.

In line with the JCI, Robert Half’s 2024 Salary Guide also reveals that while 69% of businesses feel confident in their growth prospects for 2024 and 47% plan to increase their permanent headcount next year, a staggering 75% are already concerned about their ability to attract and retain skilled talent.

Matt Weston, Senior Managing Director UK & Ireland, at Robert Half said: The health of the labour market and that of the wider economy have often been linked, yet at present, they are less synced than anticipated. Today’s labour market snapshot is the culmination of factors from the last few years, including Brexit, the Great Resignation and the pandemic. Things have changed and access to the skilled talent businesses need to remain competitive is becoming ever more challenging. Increased post-pandemic economic inactivity, innovation outpacing traditional learning routes and limited social mobility have the potential to further weaken the labour market’s ability to match jobs with skilled workers.”

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