Scottish recruiters reported a decline in permanent placements during December.
The latest Royal Bank of Scotland report on jobs showed that the rate of contraction eased considerably over the month though, with the respective index climbing from 40.6 in November to 46.8 in December.
Nevertheless, placements fell for the third month running overall, as recession fears and market uncertainty dampened recruitment activity.
Temporary billings likewise fell for the third successive month. Growth of demand for labour continued to soften during the final month of the year.
Permanent and temp vacancies expanded at the weakest rates in 22 and 27 months, respectively. Nonetheless, in efforts to attract and secure candidates amid ongoing reports of labour shortages, firms across Scotland continued to raise starting salaries and temp wages sharply.
The number of permanent staff appointments across Scotland fell in December, thereby extending the current run of contraction to three months.
According to survey panellists, reduced market confidence and the cost of living crisis weighed on recruitment. Though strong, the reduction in permanent placements across Scotland was softer than the UK-wide average.
For the third month running, recruitment consultancies across Scotland reported an increase in billings received from the employment of short-term staff during December. Adjusted for seasonality, the Temporary Billings Index ticked down from November, to signal a quicker rate of contraction.
Skill shortages and difficulties sourcing candidates were in part blamed for the latest decrease.
While a further reduction in temp billings was recorded across Scotland at the end of 2022, the UK as a whole registered a modest expansion.
The availability of candidates to fill permanent positions across Scotland worsened for the 23rd consecutive month during December. Although easing from November, the rate of decline remained marked overall and among the fastest on record.
Acute skill and candidate shortages limited the supply of workers, according to recruiters. Furthermore, the cost of living crisis, recession fears and greater market uncertainty also restrained labour movement.
The pace of reduction in permanent candidate availability across Scotland outstripped the UK-wide average.
As has been the case in each of the last 22 months, Scottish recruiters reported a fall in temp candidate numbers during December.
The rate of reduction gathered pace for the third month running and was the sharpest since June. The latest reduction in temp staff availability was attributed to a slowdown in market conditions, Brexit and a general scarcity of labour.
December data revealed another sharp rise in starting salaries awarded to permanent joiners during December. Notably, the pace of growth continued to quicken from October’s 16-month low, with the latest upturn the steepest since June and above the historical average.
According to anecdotal evidence, labour and skill scarcity continued drive up salaries. Starting salaries across Scotland rose at a much faster pace than that recorded at the UK level.
Pay rates for temp staff across Scotland rose during December, thereby stretching the current run of wage inflation to 25 months.
While the rate of growth eased slightly from November, it remained stronger than the survey average and signalled a sharp rise in hourly wages overall. Recruiters indicated that companies raised their pay rates as part of efforts to attract staff amid ongoing labour shortages.
As was the case with permanent starting salaries, temp wages across Scotland grew at a much stronger rate than that seen across the UK as a whole.
Growth of demand for permanent staff moderated for the eighth successive month during December. Though strong, the latest upturn was the softest seen since the current run of expansion began in February 2021. Moreover, the rate of increase was weaker than the survey average.
The strongest upturns in demand for permanent staff were seen across the nursing, medical, care and computing sectors.
Scottish recruiters reported a marked slowdown in growth of demand for temp staff during December. Notably, the respective seasonally adjusted index fell to its lowest level in 27 months and pointed to only a marginal rate of growth.
Of the eight monitored sectors, IT and computing reported the strongest increase in demand, with nursing, medical and care ranking second.
Sebastian Burnside, chief economist at RBS, commented: "Greater market uncertainty and fears over a recession led clients to maintain a cautious approach to staff hiring at the end of 2022.
"Demand for labour also softened, adding to the likelihood that challenges across the labour market will persist as we enter the new year.
"Nonetheless, with difficulties sourcing suitable candidates, firms continued to raise rates of starting pay - thus, the data overall suggest that firms are becoming more selective and guarded with their hiring decisions, but willing to offer competitive pay to candidates to secure them."
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