Employer hiring optimism at eight-year high, finds Labour Market Outlook

UK employers are the most optimistic about hiring in eight years, according to the latest CIPD (@CIPD) /Adecco Labour Market Outlook report. The survey shows that all sectors are experiencing a jobs recovery, alongside an improvement in pay prospects.

The quarterly report’s net employment intentions balance, which measures the difference between the proportion of employers expecting to add jobs and those planning to cut them, has risen sharply to +27 for the second quarter of 2021, compared with +11 in the first quarter of the year.

Strong employer optimism is evident across all three major sectors of the UK economy, including the private sector (+28), voluntary sector (+28) and the public sector (+22). It means employment intentions are stronger than at any time since the February 2013 report when this measure was introduced.

This optimism has carried through to all sub-sectors, including hospitality and retail, which points to a strong and broad-based employment recovery.

The report, which surveyed more than 1,000 UK employers, also offers good news on pay, with basic pay expectations set to increase from 1% to 2% in the next 12 months. Median basic pay expectations in the private sector have increased from 1.5% to 2% on the previous quarter. By comparison, median basic pay expectations in the public sector in the next 12 months stand at 0.9%, which points to a re-emergence of a two-speed pay market between public and private sector workers.

Gerwyn Davies, Senior Labour Market Adviser at the CIPD, the professional body for HR and people development, comments:
“More jobs and improved pay prospects should give us all reason to cheer, but a solid jobs recovery must be focused on better jobs, not just more jobs. To offset the emerging threat of recruitment difficulties, employers should be reviewing not just their recruitment practices, but also the quality of work they offer – such as employment conditions, the possibility of promotion, training opportunities and the right balance of flexibility and security. There’s more to good work than raising wages.”

The survey also found that redundancy and recruitment intentions have returned to pre-pandemic levels this quarter:

• The proportion of organisations planning to recruit in the three months to June 2021 has risen to 64% – the highest level since the February 2020 Labour Market Outlook.
• Strikingly, there has been a sharp increase in hiring intentions among the worst affected sectors during the pandemic. For example, over two-thirds (66%) of hospitality firms plan to recruit in the second quarter of 2021, up from a third (36%) in the first quarter of 2021.
• The proportion of employers intending to make redundancies continues to fall. Just over one in ten (12%) expect to cut jobs during the next three months, down from 20% in the previous quarter. This is consistent across all three sectors of the economy.

Davies continues:
“By offering better quality jobs, employers will be in a better position to attract and retain the staff they need, particularly in sectors that have traditionally relied on EU workers, the supply of which has fallen sharply. New limits to the supply of unskilled migrant labour and the switch to new ways of working presents many employers with an incentive to review job quality. Now is the optimal time for the HR profession to raise its voice on this issue – both to ease recruitment difficulties and raise productivity.”

“Despite the evident optimism in this quarter’s survey, it remains likely that such strong employment growth will soften during the course of 2021. This is due to the aftershocks of the pandemic, which will continue to be felt throughout the economy. It’s also inevitable that the surge in hiring activity caused by the easing of restrictions will level off. And, despite the welcome increase in basic pay expectations, it remains to be seen whether the pay award increases will be able to match any increases in the cost of living caused by the prospect of higher inflation; especially for public sector workers.”

Alex Fleming, Region President of Northern Europe at Adecco, comments:
“It is really encouraging to see that all indicators of recovery are positive in this quarter’s Labour Market Outlook, as we continue working towards the new era of work.

“The net employment intentions balance across all sectors is at its highest level since winter 2013, but the disruption of Brexit, paired with the lingering threat of COVID-19, means that now more than ever, organisations must remain committed to levelling up and building back better.

“The need for up/reskilling prospects and improved access to opportunity is only set to become more pertinent, particularly for those who are re-entering or looking to enter into the world of work for the first time.

“Therefore, future business strategies must be built on the foundations of social mobility and inclusion, which will not only help to strengthen talent attraction and retention levels but also ensure companies remain resilient in the critical months ahead.”