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Revealed: Jobs market health in eye of cost-of-living crisis

People remain optimistic about their job prospects despite the economic turmoil facing the country.

Although the UK is teetering on the brink of recession according to recent forecasts, the findings from the latest Jobs Confidence Index (JCI) report reveal that job security, job search and career progression prospects remain positive among workers and jobseekers. The prevailing skill shortages and historically low rates of unemployment are testament to the fact that qualified professionals remain in strong demand and they are feeling upbeat about the future. In this article, we dissect some of the key findings and interesting insights from the research in more detail.

Produced in partnership with the Centre for Economics and Business Research (Cebr),  four key pillars were examined which provide the best indication of jobs confidence in the UK. Let’s get the negative news out of the way first. As touched upon above, macroeconomic sentiment has taken a hit and our findings reveal a 41.8 point drop in this pillar. This isn’t surprising given the cost of living crisis and high energy prices, inflation and interest rates. Recent IMF estimates about the UK’s projected growth aren’t the most cheery with the economy expected to contract in 2023.

So the economic landscape will be challenging, of that there is no doubt. It’s by far the worst performing of the four pillars that constitute our jobs index. The worsening of household finances and the rise in mortgage rates have all added to consumer worries. This of course spills over into the economy at large, as consumers spend less at a time when the economy needs all the stimulus it can get. And given rising energy and materials costs, businesses for their part have had to look at their cost base, reducing office space and in some cases permanent headcount.

On a more positive note, although we found that job security confidence fell (by 18.3 points), our Q4 2022 figure was the fifth highest on record – buoyed by a tight labour market and a rate of joblessness in Q1 of 2022 that was the lowest seen in close to 50 years. Interestingly, even though the tightness of the labour market loosened, over half (53.4%) of the employees surveyed remained confident about their work prospects. An uptick in temporary work was one of the factors that influenced this jobseeker confidence metric and of course adopting flexible solutions such as hiring contractors is one of the key ways in which employers can help to mitigate skill shortages.

Even though our pay confidence pillar remained in negative territory, it rose by 28.4 points despite falling real wages and the erosion of purchasing power due to rising inflation. Clearly, given the current labour market dynamics, employers are only too well aware that if they cannot meet candidates’ expectations and raise salaries in line with inflation, these highly marketable individuals will not hesitate to look elsewhere. And those employers willing to pay a premium for in demand skills will have a considerable advantage in being able to poach top talent.

While remuneration remains a top priority for cash-strapped workers, there are many other levers that employers can use to retain key staff. Some obvious examples include a strong focus on learning and development as part of their wider employee value proposition (EVP) as well as offering a flexible, hybrid working arrangement, which has to be considered the norm now. A word of caution about counter-offers, though – over a quarter of employers (27%) in our 2023 Salary Guide  survey said that those individuals who were offered better terms by their employer did not stay long term.

Optimism high for job and career prospects
The rise in job search and progression confidence by 1.6 points – the one of two pillars to have increased in value – was particularly pleasing to see and was driven by a fall in the number of workers taking part-time roles (because of their inability to find full-time work). Perhaps the standout statistic of all was the 42.7% who felt confident about their prospects over the next five years. Social mobility does, however, remain a problem as does the level of non-student economic inactivity, for example those deciding to take early retirement during the pandemic, further exacerbating skill shortages.

On the point of social mobility, it is vital that employers engage with wider communities and different under-represented groups to further widen their talent pools. Tapping into these channels will not only help plug those skills gaps but the diversity of skills, backgrounds and experience of these groups can add such untold value to an organisation and its bottom line. Focusing on upskilling and reskilling initiatives will also be fundamental for growth as will retaining experienced workers who otherwise are likely inclined to take early retirement. Employers should not rest on their laurels but seek to offer development and training opportunities.

Forecasts indicate that the UK economy will grow less than other major economies in 2023 and that a recession could still be a very real possibility. Retention must therefore be a key business imperative in 2023. And in such a tight labour market – according to Cebr the unemployment rate will peak at 4.5% in Q3 2023 – organisations must future proof their talent strategies, not only upskilling and reskilling their existing workforce, but also ensuring that their EVP and messaging really stand out. While benefits such as flexible working are table stakes, employers can help financially in a number of ways, for example offering support with travel and food costs.

Yet despite our JCI falling by 7.5 points, it was still 58.1 points higher than Q2 2009 during the financial crash. UK workers remain upbeat about their job security, job search and progression – this is borne out by the high levels of employment and an increase in temporary/contract jobs. Even though pay has not kept up with inflation, jobseekers and employees know that a candidate-short labour market will work in their favour and help them secure a better financial package given the dearth of specialist skills. In this very tight labour market, candidates remain in the driving seat.

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