Jobs market shrinks in July but signs of stabilisation

● Temp billings and permanent appointments fall ● But ‘meaningful recovery’ will take time, RBS says

The Scottish labour market faces “immensely challenging” conditions, with hiring activity continuing to shrink “substantially” overall last month, according to new data published today.

The job report from Royal Bank of Scotland (RBS) however also found that the pace of the downturn softened further, with signs that the market is heading towards “stabilisation”. The seasonally adjusted permanent placements index came in at 40.9 – well below the “crucial” 50 neutral mark to signal a further marked drop in permanent staff appointments in Scotland, outpacing the fall seen at a Uk-wide level. That said, the index made up a further 12.6 points from June and indicated the softest reduction since February.

The permanent vacancies index also came in well below 50, at 34.8, and signalled a fifth successive monthly fall in demand for permanent staff. The latest drop in vacancies was the gentlest since March, but pronounced nonetheless.

As for temp billings, there was an eighth successive monthly drop in the index to 43.5, the softest since January – and some respondents noted that the easing of lockdown restrictions had led firms to take on additional short-term staff.

Pay also took a downward turn, on the back of a backto-back monthly increase in the supply of permanent staff, with the rate of expansion remaining among the quickest on record, despite slowing from June.

A fourth successive monthly fall in salaries awarded to permanent new joiners was recorded in July, although the drop was the weakest for three months. Scottish recruiters highlighted a fifth successive monthly reduction in temporary vacancies during July.

RBS chief economist Sebastian Burnside said: “Latest survey data continue to highlight the immensely challenging conditions encompassing the Scottish labour market at present. Although there were frequent mentions that looser restrictions around the Covid-19 pandemic had allowed businesses to reopen, substantial uncertainty and excess capacity is stifling firms’ appetite to take on additional staff. Where they do, feisty competition among candidates for roles is driving pay down further, as both permanent salaries and short-term wages declined markedly again.

“Overall, data are moving in the right direction, with signs that the labour market is edging towards stabilisation, but it is likely that it will take more time before any meaningful recovery takes place.”

Meanwhile, a survey of firms in tech, finance, property and leisure found that 60 per cent said they were busier than usual in June, but the same percentage reported a negative outlook for the future of the economy between March and June.