The latest edition of the Robert Half Jobs Confidence Index (JCI) has revealed that job confidence has reached its highest peak in almost two years, thanks, in greater part, to an improvement in the pay confidence pillar.
Our quarterly Jobs Confidence Index analyses the job market through the lens of worker sentiment against a backdrop of key macroeconomic factors. The big picture looks positive though there are a few ‘watchouts’ on the way.
In this article, Matt Weston, Senior Managing Director at Robert Half, shares an overview of the latest Jobs Confidence Index report, exploring the key trends related to our most recent findings.
The UK economy is on a path to recovery. After ending 2023 in a technical recession, ONS estimated that GDP increased by 0.6% in Q2, following a rise of 0.7% in Q1, marking two consecutive quarters of growth. In early August, the Bank of England raised its 2024 growth forecast from 0.5% to 1.25%.
Inflation has stayed close to the BoE's target, prompting them to cut interest rates for the first time in almost five years. And the improved outlook has undoubtedly been felt among UK workers.
An uptick in temporary work levels and a slight decline in unemployment rates have kept the labour market feeling tight. This coincides with a continued decline in job vacancies, which fell to 889,000 in Q2 2024, marking the 24th consecutive period of falling vacancies. Yet, through it all, workers have kept a positive outlook.
Over 60% expressed confidence in their job security over the next six months, a marginal increase from the previous quarter, making this the highest job stability reading since Q1 2023.
Workers may view the increase in temporary work as a response to economic uncertainty — something they potentially anticipate will change as things continue to improve.
Pay confidence experienced the strongest quarterly gain amongst the four JCI pillars. Improved pay gaps and job earnings security pushed it out of negative territory in Q2 2024.
Our observations of pay awards outpaces inflation and the latest annual growth in total pay stands at 4.5%. This marks a positive turn for workers but potentially signals trouble for the Bank.
The mix of improved pay confidence and notable pay settlements underway in the public and transport sectors carry the risk of exacerbating inflation in the future as private sector businesses feel pressured to meet pay expectations. In turn, this could hold back muchneeded interest rate cuts.
Ongoing skills shortages harm employers, and hinder company – therefore national - growth, productivity, and innovation. Conversely, the need for skilled talent continues to keep the ball in workers' courts where bargaining power is concerned.
Armed with confidence in their niche skill sets and experience, they can jump ship to pursue new opportunities if their employer doesn't meet their reward and career expectations.
Without increased support from the government and businesses, systemic skills shortages combined with the tight labour market could cause a significant drag on economic prospects.
For all its recent growth, the UK economy is still precariously placed. Although earnings growth has slowed and services price inflation has eased, levels remain elevated. Brexit caused an estimated shortfall of 330,000 workers in the UK labour force, shrinking the available talent pool in high-skill sectors.
A perfect storm of economic inactivity (early retirement, elevated long-term sickness levels, etc.), a 0.3% drop in labour productivity for Q2, and stubborn wage growth could jeopardise attempts to keep inflation on a downward turn.
Cebr predicts rate cuts before the end of the year, but all factors considered, rate-setters and the government are likely to approach rates cautiously.
The hope is that, with inflation dropping faster than the slowing pace of salary increases, workers will feel wealthier and, therefore, less likely to pressure businesses for pay increases.
The government's 'New Deal for Working People’ aims to address the ongoing marginalisation and disenfranchisement of many particularly inequality in the working class. Despite this, our latest JCI survey results show the reception has been surprisingly lukewarm.
Although the JCI shows that workers are more likely to say this incoming boost to employment rights will have no impact (44%) rather than a positive impact, more than half (51.4%) of younger UK workers anticipate a positive impact. This could be due to young employees having a long-term vested interest in the improvement of their workplace rights.
The JCI also showed that an average of 36% of workers need help understanding the current benefits or support offered by their employer. More than a third (36%) weren't sure if their current employer already provided aspects of the 'New Deal', indicating that better employee engagement or communication tools might be needed.
The 'New Deal for Working People' is a welcome change to the employment landscape but will require a collaborative approach to ensure businesses – especially SMEs - can implement the new regulations without harm to their prospects.
Moreover, the Growth and Skills Levy will require partnership with employers and academia to reach its full potential. Ultimately, skills are the key to creating an economy that benefits workers and businesses and boosts productivity and GDP in the long run.
I foresee continued, measured growth for the UK economy over the coming year as business investment unlocks stalled hiring and productivity gains. Cebr predicts a further increase of 1.6% and an estimated trend growth rate of around 1.7%, broadly in line with the average pre-COVID growth rate. Furthermore, the International Monetary Fund forecasts that adopting artificial intelligence could elevate the UK's economic growth by 16% by enhancing output and productivity.
The labour market has been surprisingly resilient but challenging for business leaders. There's been little sign of things loosening for employers in the wake of recent market improvements. The government's New Deal on day one rights throws a wild card into the mix that may make businesses more cautious, especially when hiring permanent staff.
Training and education are, therefore, the key to our future economic prosperity. The workers we meet want new skills so that they – and their families - can have better lives. Businesses, government, and academia must prioritise upskilling and talent development for the labour market to loosen. Until we can equip more workers with the tools needed to help businesses thrive, growth may continue at a snail's pace. Well-trained employees will always prosper and grow, as will their employer's business
In partnership with the Centre for Economics and Business Research, the quarterly Robert Half Jobs Confidence Index is the most authoritative report on the key socio-economic factors influencing confidence in the UK labour market.
