The UK jobs market showed fresh signs of stabilising in September, with permanent placements growing at the fastest pace in four years, according to a closely watched survey of recruiters. The KPMG and REC Report on Jobs also found that pay growth cooled slightly, offering a potential relief for policymakers worried about inflation.
What the survey shows
The survey's permanent placements index rose to 50.9 in September, up from 50.5 in August. Any reading above 50 signals growth, so the latest figure points to a modest but accelerating expansion in hiring. Recruiters reported that demand for staff was strongest in IT and engineering, sectors that have remained resilient despite broader economic uncertainty.
At the same time, growth in permanent starting salaries slowed compared with the previous month. That is a notable development because pay pressures have been a key concern for the Bank of England (BoE) as it tries to bring inflation down to its 2% target. Slower wage growth could reduce the risk of a wage-price spiral, where higher pay leads to higher prices and vice versa.
Why this matters
The REC/KPMG Report on Jobs is often seen as an early indicator of official labour market data, because it polls recruiters who are on the front line of hiring decisions. A sustained pickup in placements could signal that the UK economy is gaining momentum, which might influence the BoE's thinking on interest rates.
However, the survey also noted that overall demand for staff remained soft. That suggests the recovery in hiring is still fragile and not yet broad-based. The cooling in pay growth, while welcome for inflation, could also reflect that employers are not under intense pressure to offer higher wages, which might indicate lingering slack in the labour market.
What it means for investors
For everyday investors, the survey offers a mixed picture. On one hand, faster hiring is generally positive for the economy and for corporate earnings, as more people in work means more spending power. On the other hand, the cooling in pay growth could weigh on consumer spending, which is a major driver of UK economic growth.
The data also has implications for interest rates. If the BoE sees wage growth easing, it may feel less pressure to keep rates high for longer. Lower rates tend to be supportive for stock valuations, particularly for growth-oriented companies, and can also reduce borrowing costs for households and businesses.
Investors should watch upcoming official labour market data to see if the survey's findings are confirmed. A sustained improvement in hiring, combined with moderating pay growth, could be a sweet spot for the economy: enough momentum to support growth, but not so much that it reignites inflation.
Broader context
The UK labour market has been under pressure over the past year, with many firms freezing hiring or reducing headcounts as they grappled with higher interest rates and weak demand. The latest survey suggests that the worst may be over, but the recovery is uneven. IT and engineering roles are leading the way, reflecting structural trends such as digitalisation and the transition to a greener economy.
For investors, sectors tied to these areas, such as technology and infrastructure, could benefit from sustained hiring demand. However, the overall softness in demand means that a broad-based recovery is not yet guaranteed.
The survey also comes at a time when other economic indicators are sending mixed signals. While some data points to resilience, others, such as US services surveys flagging hotter prices, suggest that inflation pressures remain a global concern. The BoE will be watching both domestic and international developments closely as it sets monetary policy.
Looking ahead
Investors will be keen to see if the pickup in placements continues in the coming months. The REC/KPMG survey is a useful barometer, but it is not definitive. Official data from the Office for National Statistics will provide a more complete picture of the labour market.
For now, the message is cautiously optimistic: hiring is improving, but pay growth is cooling, and demand remains patchy. That combination could be positive for the economy and for markets, but it is too early to declare a full recovery.
