JobsOutlook - Engage Employee · Jul–Sep 2014 Oct–Dec 2014 Employed Self-employed Temps in work Jan–Mar 2015 NOTE: Figures for April and May 2015 have been revised this month

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86% of hirers plan to add permanent headcount over the next quarter, whilst almost eight in ten (79%) plan to do so in the medium term.

95% of employers know that they either have no workforce surplus or that the little capacity they have may be insufficient to accommodate any form of increase in demand.

99% of hirers plan to hold or increase agency worker levels in the medium term, whilst 98% intend to do the same over the next quarter.

In the past year, pay rises were twice as likely in the private (40%) as the public sector (20%), despite staffing increases being broadly similar across the sectors.

Employers anticipate driving and distribution skills to be in short supply to fill both permanent (14%) and temporary (10%) roles over the next year.

Eight in ten (79%) hirers are using agency workers to gain short-term access to key strategic skills.

JobsOutlookAugust 2015

CONTENTS Permanent Recruitment / Temporary Recruitment / Labour Market Dashboard / Employer Dashboard / Agency Dashboard / Sector Prospects / Predictive model

Permanent and agency hiring intentions surge

Key Points from July Survey

Three quarters (74%) of employers believe that economic conditions, domestically, are improving and 45% believe that this more favourable outlook will lead to increased confidence in making hiring and investment decisions by their organisations.

Confidence

Recruitment &Employment

Confederation

1 3 5

4 62

permanent

86%next

quarter

Do you think economic conditions in the country as a whole are getting ...

Do you/does your organisation expect confidence in hiring and investment decisions to get ...

REC-Markit Predictive model

Our current nowcast is for a further modest rise in the labour force survey measure of unemployment of 10 thousand in the three months to July, and for the unemployment rate to hold steady at 5.6%. This latest nowcast points to a slightly slower rise in unemployment than the 25 thousand increase in the three months to June.

More information about the predictive model can be found on page 9 of this report.

5.6%

Expected unemployment rate for March–July 2015

95%no workforce surplus

A lot better A little better No change A little worse A lot worse Don’t know

396 38 11 15

[%]

668 8 9 2 7

[%]

79%medium term

temporary

98%next

quarter

99%medium term permanent

temporary

10%

14%

8 in 10use agencyworkers

40%private sector

20%public sector

pay rises

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OUTLOOK BY EMPLOYER SIZENet balance of short-term expectations by employer size – permanent staff The drive in short-term permanent hiring intention remains evenly spread across all sizes of employer. Small companies (11–50 employees) are, however, evidencing the highest likely demand over the next quarter in July.

NOTE: Figures are based on the % responding increase less the % responding decrease, analysed by size of employer

SKILLS SHORTAGES AND QUALITY OF HIRESWhere do you expect to see a shortage of workers this year?An anticipated shortfall in technically skilled workers for permanent hire claimed two of the three top spots in July, whilst those with logistics skills are also anticipated to be in short supply over the next year.

Microbusiness(1–10 employees)

76

Small(11–50 employees)

Medium(51–200 employees)

Large(200+ employees)

4%82% 7% 7% 0%

1%77% 17%

3%2%

4%82% 7% 7% 0%

1%77% 17%

3%2%

PermanentRecruitment

SHORT-TERM OUTLOOKIn the next 3 months, do you think that your organisation’s permanent workforce will increase or decrease?Short-term permanent hiring intention improved further in July, with the positive balance increasing 7 percentage points to 79%. The proportion of hirers planning to add headcount increased 12 percentage points to 86%. With 7% of employers planning to reduce worker numbers slightly, there is potential that this increased availability will partially satisfy demand.

MEDIUM-TERM OUTLOOKIn the next 4–12 months, do you think that your organisation’s permanent workforce will increase or decrease?July evidenced an 11 percentage point increase in the positive balance of medium term permanent hiring intention. With almost eight in ten hirers (79%) planning to increase numbers (+10 percentage points in the month), the 3 percentage point decrease in the proportion planning to release workers (to just 4%) will intensify competition for skills.

% of respondents

Increase greatly

Increase greatly

Increase slightly

Increase slightly

Stay the same

Stay the same

Decrease slightly

Decrease slightly

Decrease greatly

Decrease greatly

79Monthly change

Net balance

75Monthly change

Net balance

% of respondents

84

7

May–July 2015

Computing, IT, Telecoms

Driving, Distribution

14%15%

12%

12 3

Technical, Engineering

NOTE: Proportion of employers who anticipateskills shortages. Rolling three month average

11

8177



TemporaryRecruitment

SHORT-TERM OUTLOOKIn the next 3 months, do you think that your organisation’s use of agency workers will increase or decrease?In addition to UK plc’s signal of strengthened permanent hiring intention in July, hirers also highlighted their plans to increase agency worker numbers. The proportion of hirers planning to add agency headcount over the next quarter increased by 13 percentage points (to 44%). The fact that just 2% plan any form of release will add to their challenge.

OUTLOOK BY EMPLOYER SIZENet balance of short-term expectations by employer size – agency staffing Whilst the hiring intentions of microbusinesses largely focus around engaging permanent staff, large employers continue to increase their intended focus on hiring agency workers.

NOTE: Figures are based on the % responding increase less the % responding decrease, analysed by size of employer

MEDIUM-TERM OUTLOOKIn the next 4–12 months, do you think that your organisation’s use of agency workers will increase or decrease? Whilst the proportion of hirers planning to increase agency worker numbers in the medium term increased by 12 percentage points this month (to four in ten), just 1% of organisations signalled any intent to reduce numbers. This results in 99% of hirers planning to hold or increase agency staffing levels.

SKILLS SHORTAGES AND QUALITY OF HIRESWhere do you expect to see a shortage of workers this year?It is amongst technical, managerial/professional and logistics workers that hirers anticipate a shortfall in the availability of agency workers over the next year. With two of the top three categories also being flagged as an issue over the anticipated availability of workers for permanent hire, this points to areas of key skills shortage.

Microbusiness(1–10 employees)

Small(11–50 employees)

Medium(51–200 employees)

Large(200+ employees)

Increase greatly

Increase slightly

Stay the same

Decrease slightly

Decrease greatly

39Monthly change

Net balance

% of respondents% of respondents

Increase greatly

Increase slightly

Stay the same

Decrease slightly

Decrease greatly

42Monthly change

Net balance

NOTE: Proportion of employers who anticipate skills shortages. Rolling three month average

Professional, ManagerialTechnical, Engineering

May–July 2015

16%

10%

Driving, Distribution

3

14%

2 1

16

38 41

55

12

0%1%

1% 2%0%

1%

54%43%

39% 59%

0%1%

1% 2%0%

1%

54%43%

39% 59%

13



LabourMarketDashboard

LLOYDS BUSINESS BAROMETERAccording to Lloyds, business confidence fell 5 percentage points to a 5-month low in July (50%), fuelled by a decline in sentiment towards the UK’s economic prospects. Firms’ sentiment around their own trading prospects was also marginally lower.

Total employment, employed and self-employed

CONSUMER CONFIDENCE INDEX Following last month’s 6 point increase to +7, noted by GfK as ‘a real post-election bounce’, the Index decreased by three points in July to +4. Three of the measures used to calculate the Index saw decreases this month, one measure saw an increase and one stayed the same. Expectations for the General Economic Situation over the next 12 months decreased five points to -1, some ten points lower than in July 2014.

TOTAL EMPLOYMENT – PERMANENT AND TEMPORARYWhilst the UK’s workforce reduced by 63,000 against the previous quarter, it remained 354,000 higher than in Q2 2014. One notable year-on-year decrease was in self-employed numbers – down by 95,000. Of this figure, 70,000 were full time roles, 59,000 of which were performed by men. 200,000 potentially ‘falsely self-employed’ workers in construction were the government’s key target for new legislation introduced in April 2014.

UNEMPLOYMENT AND CLAIMANT NUMBERSFor the second consecutive month, unemployment was reported as rising against the previous quarter – up by 25,000 in Q2 2015 against Q1. This implied a rate increase from 5.5% to 5.6%. Unemployment remains 221,000 lower than in the same period last year, however, when the rate was 6.3%. The quarterly rise was felt amongst both those unemployed for up to 6 months and those out of work for 6–12 months. Youth unemployment rose slightly from 15.9% to 16.0%, quarter-on-quarter.

% net balance % net balance

Business prospects(LHS)

Economic prospects (RHS)

Long-term average

(both series)

60

0

40

80

20

-20

-60

-40

-80

-100

50

60

70

80

40

30

0

10

20

-10

-20

-30

Jul 07 Jul 08 Jul 09 Jul 10 Jul 11 Jul 12 Jul 13 Jul 14 Jul 15JulJun Jul Sep NovAug DecOct Jan MayFeb Mar JunApr

+7

+1 +1

-2 -2-1

-2-4

+1 +1

+4 +4+4

+1

Source: LBCB, BDRC Continental

Source: Labour Market Statistics, August 2015: unemployment (quarterly) and claimant count (monthly)Source: ONS

Source: GFK

30,680 30,793 30,896 31,098 31,035

25,831 26,027 26,181 26,370 26,316

4,608 4,520 4,501 4,504 4,5121,651 1,701 1,704 1,688 1,644

Total employed

Apr–Jun2015

Apr–Jun2014

Jul–Sep2014

Oct–Dec2014

Employed Self-employed Temps in work

Jan–Mar2015

NOTE: Figures for April and May 2015 have been revised this month

Num

ber

00

0s

Dec

Number of claimants Unemployment

JulMayMar JunAprJun Jul Aug Sep Oct Nov Jan Feb

730

1,04

0

1,00

5

967

946

922

893

863

826

796

776

764

754

748

2,0741,959 1,862 1,827 1,852

-3



EmployerDashboard

WORKFORCE CAPACITY How much capacity is there in your business to take on more work?The fact that hiring intention has been increasing over the past three months appears to be being borne out in the additional capacity that this is realising for employers. For the majority, however, this translates into just a little potential spare resource. Based on the surge in hiring intentions in July, it would appear that this small increased capacity is not anticipated to be able to satisfy demand.

Workforce changes made in the last year 3 month rolling average to July 2015

3 month rolling average to July 2015 Recruitment channels used for temporary staffing as at July 2015

WORKFORCE PLANNING BY SECTOR Instances of increased pay/earnings were twice as likely in the private sector (40%) as the public sector (20%) in the year to July 2015, whilst the instances of staffing level increases were broadly similar across the sectors. In a tightening labour market, the ability of private sector employers to respond to demand by offering increased pay/earnings could help them attract staff more effectively.

WORKFORCE PLANNINGWhat changes have you made to your workforce in the past year?Seven in ten employers (69%) either increased pay or headcount over the last year, whilst 22% made no workforce changes whatsoever. This left just 9% making redundancies or cuts to pay/hours.

RECRUITMENT CHANNELS USED OTHER THAN AGENCYThe key channel through which hirers have lost their dependency and/or capability to source temporary workers over the last year is their alumni network. This route was used by just 10% hirers in July compared with 20% in the same month last year. Talent pools/staff banks remain a channel of choice, and are notably more significant to hirers that throughout 2014.

A little – we might take on staff if demand grew this year

None – we would have to take on new staff

A fair amount – we could take on a lot more work now

Considerable – we have a great deal of spare capacity

40%

0% 1%

42%

1% 1%

25% 28%

% responses

Reduced pay Reduced hours Headcount freezeStaffing increased

Redundancies Increased pay/Earnings None

8% 3% 6%4%20%

21%

Privatesector

Publicsector

13%

7%

15%

16%

6%

12%

10%

13%

8%

15%

4%

15%

13%

2%7%

20%

9%

15%

16%

6%

13%

14%

3%

9%

19%

7%

13%

17%

7%

13%

14%

4%

10%

18%

6%

11%

15%

8%

11%

15%

4%

9%

20%

7%

11%

13%

7%

11%

16%

3%

8%

21%

8%

13%

12%

9%

10%

16%

5%

9%

19%

7%

13%

14%

8%

11%

15%

6%

10%

18%

6%

12%

14%

10%

11%

14%

7%

12%

16%

6%

16%

10%

11%

15%

7%

12%

16%

6%

18%

11%

10%

10%

4%

18%

15%

11%

18%

10%

11%

10%

4%

15%

13%

15%

15%

10%

14%

14%

5%

14%

8%

15%

MayApr JunAug JulJul Sep Nov DecOct Jan Feb MarPeople approach us

Job Centre/Universal jobmatch

Internal referrals Online job boards Own web site

Talent pools and staff bank Alumni network

Offline advertising Social media

10% 7% 3% 4% 5%

3%41%

5%

28%22%

1%0%

None

Reduced pay Staffing increased

Redundancies Increased pay/earnings

Headcount freezeReduced hours

3 monthrolling average

0%

Resp

onde

nts

July

201

4Ju

ly 2

015

0%58%

57%

37%

35% 8%

5%



AgencyDashboard

CRITERIA USED BY EMPLOYERS TO SELECT AGENCIESHow important to you are the following factors when it comes to choosing and using a recruitment agency to cover temporary positions?With the ability to provide management information and an agency’s scale (i.e. its size and/or geographical or skills specialism), fast approaching the level of importance given to overall quality of service, an agency’s own role appears to be becoming as strategically important as the workers it provides. However, costs remain the top concern.

TEMPORARY TO PERMANENT In what proportion of hiring organisations do temporary workers go on to take permanent roles?Whilst the proportion of employers in which at least one temporary worker has transferred to become a permanent employee over the last year is slowly increasing again, at 44% this remains significantly lower than the 90% level at which it sat for many years. With demand for both permanent and agency workers being strong, it is likely to suggest that decisions are being made on a case by case basis, rather than signalling any notable shift in strategic intent.

IMPORTANCE OF AGENCIES TO EMPLOYERS How important would you say that agency workers are for your organisation in terms of the following?The ability to use agency workers to cover others’ leave – the key benefit for nine out of ten hirers two years ago – now ranks 6th in importance. In its place, eight in ten employers now cite the ability to gain short-term access to key strategic skills as being of greatest importance.

EMPLOYER SATISFACTION WITH AGENCIES USED IN LAST 2 YEARS How satisfied are you overall with the agencies you have used in the last 2 years?A net satisfaction rating of 93% in July serves as a useful indication of how well recruitment agencies are faring amid the pressure of heightened demand. This level of satisfaction remains a significant achievement for a service industry.

Scores indicate the % responses stating the factor is quite or very important.Percentage of respondents where at least one temp has become permanent

34%

44%

56%60%

62%59%

52%48%

32%36%

55%

38%

59%

MayApr JunJul Aug JulSep NovOct Dec Jan MarFeb

3% 0%

1%

63%

33%

Very satisfied Fairly satisfied Stay the same

Fairly dissatisfied Very dissatisfiedScores indicate % responses stating the factor is quite or very important

93

Monthly change

Net satisfaction

82%81%

66%

51%

67%50%

34%

59%82%

79%

20%

91%

57%

66% 37%

52% 59% 54%

July 2013

Peaks indemand

Coveringleave

Reducingcosts

Managingchange

Respondingto growth

Providing shortterm access

to key strategic skills

Managinguncertainty

% responses

July 2014 July 2015

58%31%

23%

45%48%

49%

94%100%93%

94%98%

85%

35%

46%

70%

27%23%

57%

68% 75%

July 2013

Agency brand Agency scale Management information

Quality of service

Price/costs of workers

Trade associationmembership

% responses

July 2014 July 2015

14%

-2



Temporary workers earn less than they would if theywere permanent

Cannot say/Not applicable/Don’t know

Temporary workers earn more than they would if they were permanent

Temporary workers earn about the same as they would if they were permanent

80%

70%

65%

50%

40%

30%

20%

10%

0%MayJul 14 Aug Sep Oct Nov Dec Jan Feb Mar Apr Jun Jul 15

65 65 65 6561

56 56

62

32

38

4

61

29 31 29 2932

30

36

50

41

6

35 6 8 63 3 3

1 1 02

42

65

32

30

102

322

5544

01

54

45

AgencyDashboard

SATISFACTION WITH CANDIDATES How satisfied are you with the quality of candidates presented to you by your agencies?89% of hirers are satisfied with the quality of candidates being presented by agencies, despite increasing demand for their services and skills shortages in key areas.

AGENCY WORKER PAY RATESHow do agency pay rates compare to permanent worker pay rates?Almost all hirers (99%) believe that agency worker pay rates translate into the same or higher earnings than that enjoyed by their permanent counterparts.

Very satisfied Fairly satisfied Neither satisfied or dissatisfied Fairly dissatisfied Very dissatisfied

52%

37%

5%6%

0%

3 month rolling average to July 2015



TECHNOLOGY

OFFICE SALESPROFESSIONAL

HOSPITALITY MEDICAL

SectorProspects

EDUCATION ENGINEERING FINANCE

INDUSTRIAL

TemporaryPermanent

The charts show the month on month increase/decrease in sector prospects using the most recent three months rolling average values, against a zero base set in January 2012.

WHICH SECTORS ARE LIKELY TO SEE THE GREATEST DEMAND FOR AGENCY AND PERMANENT STAFF OVER THE NEXT 3 MONTHS?With the exception of four skills pools where forecast demand over the next quarter remained broadly static, the likely demand for all other categories of workers increased in July.

Skills areas in which forecast demand is near to its all-time peak, since January 2012, include both permanent and temporary construction workers, permanent drivers and engineers and agency technical, professional and office workers.

-100

-50

0

50

100

150

250

200

-150

Jan Mar MayApr JunJul JulSepAug NovOct Dec Feb

-100

-50

0

50

100

150

250

200

-150


-100

-50

0

50

100

150

250

200

-150


-100

-50

0

50

100

150

250

200

-150


-100

-50

0

50

100

150

250

200

-150


-100

-50

0

50

100

150

250

200

-150


-100

-50

0

50

100

150

250

200

-150


-100

-50

0

50

100

150

250

200

-150


-100

-50

0

50

100

150

250

200

-150


-100

-50

0

50

100

150

250

200

-150




UNEMPLOYMENT RATE SET TO REMAIN STABLE AT 5.6%

REC-MarkitPredictive model

Labour Market Tracker (RHS)

Tracker Index

20072006 2008 2009 2010 2011 2012 2013 20152014

Three month unemployment change (thousands)

275

225

175

125

75

25

-25

-75

-125

-175

-225

3.75

2.75

1.75

0.75

-0.25

-1.25

-2.25

-3.25

Unemployment change (LHS)

CHART 1: TRACKER MODEL HISTORY

Nowcast Lower

Oct 2013Jul 2013 Jan 2014 Apr 2014 Jul 2014 Jan 2015Oct 2014

100

50

0

-50

-100

-150

-200

ActualUpper

Thousands

Jul 2015Apr 2015

CHART 2: THREE MONTH UNEMPLOYMENT CHANGE

Data sources: Markit, REC, KPMG, ONS, European Commission, Google

The REC and Markit have developed a model to ‘nowcast’ the UK’s headline unemployment rate. The REC and Markit have developed a model to ‘nowcast’ the UK’s headline unemployment rate.

Our current nowcast is for a further modest rise in the Labour Force Survey measure of unemployment of 10 thousand in the three months to July. This would imply the unemployment rate holding steady at 5.6%. The Office for National Statistics (ONS) will publish these statistics on 16 September 2015.

The latest nowcast points to a slightly slower rise in unemployment than the 25 thousand increase in the three months to June, and also the 15 thousand rise in the three months to May. Prior to this, unemployment had fallen continuously for over two years.

The turnaround corresponds with weaker survey evidence such as the Report on Jobs, which is currently signalling the slowest growth of staff appointments in more than two years. The PMI Composite Employment Index is similarly running at its lowest level in 22 months.

As shown in the chart, the model has generally done a good job at pre-empting shifts in the official data over the past 18 months or so.

MethodologyThe model draws on a range of official, survey and internet search data, which are available on a more timely basis than our target variable. This includes:

• REC’s JobsOutlook survey data on employers’ expectations for short-term staffing requirements

• KPMG/REC Report on Jobs survey measures of permanent placements and temporary billings

• Markit PMI data, in the form of the composite employment and output indices covering the manufacturing, services and construction sectors

• Markit’s Household Finance Index measures of workplace activity and job security

• The European Commission consumer survey measure of unemployment expectations

• Google internet search patterns for terms which we believe give useful signals on the health of the labour market

• ONS measures of claimant count joblessness and vacancies

We have created a single-variable model that provides an overview of underlying conditions in the labour market. We used principal component analysis to extract common factors from our dataset, which we could then weight to create what we call our “Labour Market Tracker”. To produce our nowcasts, we combine the Labour Market Tracker with a weighted average of single-variable models to guide our prediction for the three-month change in unemployment.

‘Lower’ and ‘upper’ lines in the chart above represent the bounds of a 70% confidence interval around our nowcasts for unemployment changes since July 2013.


Documents

JobsOutlook - Engage Employee · Jul–Sep 2014 Oct–Dec 2014 Employed Self-employed Temps in work Jan–Mar 2015 NOTE: Figures for April and May 2015 have been revised this month