ONS latest | UK jobs market 'begins to cool' as expert calls for HR solutions

UK jobs market 'begins to cool' as expert calls for HR solutions

The UK jobs market is “beginning to cool”, with wage growth still high and more people dropping out of the workforce, according to new data.

The latest Office for National Statistics (ONS) figures reveal that the unemployment rate jumped to 4.2% from 3.9% in February, which is the highest level in nearly six months. These latest figures indicate that economic uncertainty is taking its toll on UK employment.

Core wages rose by the least since mid-2022 in the three months to February but remained strong by historical standards

The ONS said there are "tentative signs that the jobs market is beginning to cool".

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Yael Selfin, chief economist at KPMG UK, said the rise in the unemployment rate and the latest slowing of pay pressure suggested the labour market was generating less inflation.

"The slight easing in regular pay growth will bring some comfort for the Bank of England which has relied on the pay data as a key gauge of domestic inflationary pressure," Selfin said.

‘Broaden the talent pool to fix the problem’

However, Tom Cornell, Senior I/O Psychology Consultant at HireVue highlighted a paradox in the current job market - despite more people being unemployed, job vacancies remain abundant, yet there seems to be a shortage of suitable talent.

The root cause lies in a significant flaw within current hiring processes. The solution? Broadening the talent pool to identify more suitable candidates with better-suited skills, Cornell explained.

He said: “The current job market is paradoxical: more people are unemployed, job vacancies are still abundant, and yet there seems to be a shortage of suitable talent.

“This is because there is a significant flaw in current hiring processes, and the solution lies in broadening the talent pool to identify more suitable candidates with better-suited skills.”

Cornell went on: “Recent research has revealed that university degrees still hold significant weight in the recruitment process in the UK. Despite HR pros recognising the value of non-academic attributes such as soft skills and experience, degrees continue to be a critical determining factor.

“While 78% of HR professionals believe that their organisations offer equal opportunities for candidates without degrees, 86% of them acknowledge they still can’t do without zoning in on academic achievement before they make hiring decisions. The picture is clear: there is a marked unconscious bias towards candidates with university degrees.

“To overcome hiring bias, businesses need to integrate skills-based assessments into the core of their recruitment process.

“In return, they will gain a much fairer – and more accurate – tool to evaluate candidates' job competencies. It's fantastic to see in recent research that 63% of organisations have already adopted skills-based assessments to some extent, reflecting the growing recognition of the importance of adaptability and future-proofing the workforce.”

Positive real wage growth gives workers a chance to claw back some of the purchasing power lost during high inflation

Responding to the ONS labour market figures, Jon Boys, senior labour market economist for the CIPD, the professional body for HR and people development, commented: "With unemployment up and employment down, today’s statistics show a cooling labour market. Other evidence of cooling includes the continued fall in vacancies, and an uptick in the redundancy rate. Taken together, this will ease pressure on recruitment and retention. It may also lead to the Bank of England cutting the base rate sooner.

“Falling inflation means robust real regular pay growth of 1.9%, unseen since the post pandemic bounce back two and half years ago. If real wage growth can remain positive, workers could start to claw back some of the purchasing power lost in recent times.

“Inactivity rose this quarter. Since the pandemic the long-term sick have become an increasingly large component of the total inactive. A tight labour market has kept a focus on inactivity as government and business sought to boost labour supply amidst skills shortages. As the labour market cools this focus might lessen, but it mustn’t.

"Employers can make reasonable adjustments and invest in occupational health. Not only to facilitate people who are inactive back into work, but to future-proof their workforces by helping people to stay in work. Approximately half of people of working age with a long-term health condition are still in work, showing that appropriate measures can help both individuals and organisations be resilient.”

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