Experts have warned that employers face a challenging time ahead as the latest official figures show vacancies hitting another record high while unemployment continues to fall.
The latest data from the Office for National Statistics revealed the number of job vacancies in the three months to December 2021 rose to a record high of 1,247,000, an increase of 462,000 on the three months to March 2020 when the first lockdown came into effect.
While the rate of vacancy growth slowed – a continuing trend from a peak in the three months to July 2021 – the number of vacancies for the three months to December was still up 11.4 per cent on the previous quarter.
- Number of job vacancies in 2021 was double the previous year, figures show
- Salaries set to skyrocket in 2022 as firms try to retain employees, research finds
- In a buoyant jobs market, firms need to take a holistic approach to retention
At the same time, the ONS said the number of payrolled employees increased in December to 29.5 million, up 184,000 on November 2021 and up 409,000 on February 2020, before the first lockdown.
Similarly, the unemployment rate for the three months to November decreased by 0.4 percentage points on the quarter to 4.1 per cent.
Jonathan Boys, labour market economist at the CIPD, said overall the figures were “encouraging” and showed that the furlough scheme ended “with a whimper, rather than a bang”.
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But, he said: “The landscape of low unemployment and high vacancies poses challenges for employers’ recruitment and retention efforts.
“Unemployment decreased to 4.1 per cent which, while not lower than pre-pandemic, is very low by historical standards. Competition for candidates therefore remains fierce as there are fewer people looking for each available job.”
Today’s ONS data also raised concerns that pay rises were not keeping up with the rate of inflation, something that Boys warned would become “more acute” as the year progresses, particularly when the energy price caps are lifted in April.
The ONS figures showed that the growth in average total pay including bonuses was 4.2 per cent in the three months to November 2021, dropping to 3.8 per cent excluding bonuses. However, in November inflation reached 5.1 per cent and is expected to reach 6 per cent later this year, according to the Bank of England.
Adjusted for inflation, the ONS said the growth in average pay including bonuses was just 0.4 per cent, dropping to 0 per cent when excluding bonuses.
While not all employers are able to raise pay, Boys said there were still things employers could do to attract and retain talent – including focusing on job quality and flexibility.
“Employers will have to ensure that they are taking steps to widen their recruitment strategies and provide flexible jobs to ensure they can attract and retain older workers, people with caring responsibilities and those with long-term health conditions that are willing and able to work,” said Boys.
Jack Kennedy, UK economist at Indeed, predicted that wages would be the main tool for employers to attract talent in a tight market. “Employers are having to fight ever harder to prize recruits away from their existing jobs or persuade them to pass up job offers from other companies,” he said. “This battle for talent is being fought primarily with ever-increasing wage rises.”
Kennedy added that employees in in-demand sectors including nursing, construction and food services were all seeing above-inflation pay increases, according to Indeed’s own data.
Paul Farrer, founder and chairman of Aspire, also questioned the fall in real wages. “In our experience, this certainly isn’t the case,” he said, “From creative sectors to sales, events and technology, we are witnessing historic wage growth as businesses offer higher salaries to win the war for talent.”
Farrer also predicted that high staff turnover rates would keep vacancy levels high for some time, but that as markets return to pre-pandemic levels, the vacancy rates would begin to fall. As such, he recommended firms focus on staff retention and not just recruitment.
However, Hannah Slaughter, senior economist at the Resolution Foundation, warned that despite talk of “wage spirals”, the UK really was facing shrinking pay packets. This fall in real wages likely started as early as last summer and could continue into next summer, she said, cautioning that it was likely to get worse before it gets better.
“The big picture is that Britain will emerge from the pandemic with pay packets shrinking, and over half a million fewer people in the labour market. Both of these challenges will need to be addressed in 2022,” said Slaughter.