May 9, 2008 | posted by Michael Baxter in Employment |

Jobs – there may be a lot of doom, but the employment market remains strong, and that’s why many argue there will be no recession.

It is a similar story in the US. Sure, employment has been falling, but there are still more people working today than a couple of years ago.

If the US is indeed in the midst of recession, and should the UK follow, then we have been seeing a rare example of a recession that is not accompanied by rocketing unemployment levels.

Some economists would argue that is impossible. They partially define a recession as rising unemployment, therefore a recession with high employment is in fact an oxymoron.

As for the UK, imagine this scenario: immigration flows go into reverse as rising wage levels in Eastern Europe make working in the UK less attractive. As a result, total employment falls, but conceivably unemployment falls too, as demand for the indigenous work force rises. It is not difficult to envisage a scenario in which GDP contracts at a time of falling unemployment.

At least if that happens, there will be a pick up in the market for printing economics books, because they will have to be rewritten.

Mind you, wages will rise.

And that brings us to the latest report from KPMG and Recruitment and Employment Confederation (REC) on the job market.

Pay rates have been going up now for 57 months, but April saw the lowest rate of pay inflation during that period.

But while wage inflation was falling, something else quite interesting has been happening.

“Recruitment consultants reported a modest fall in permanent staff appointments during April – the second in the past three months,” said KMPG, ”but contract staff appointments increased at the strongest rate in five months during the month.” Apparently, higher temp billings were underpinned by the fastest expansion in short-term vacancies since January.

Alan Nolan, Director at KPMG said, “These latest figures show clearly that employers are shifting away from hiring permanent staff into a more temporary workforce as a way of dealing with the current economic uncertainty and financial crisis. Cost reduction is very much on the agenda of employers not only through the reduction of headcount but also through ways of reducing tax and national insurance contributions. We see this trend most clearly in the financial services sector. On the other hand, in the medical, engineering and construction sector, demand for permanent staff is still strong because of the ongoing skills shortages in these areas.”

So, if temporary appointments are taking over from full time appointments, is it time to change the laws relating to temporary staff employment?

On this, Helen Reynolds, Acting Chief Executive Officer at REC had something to say, “Equal treatment measures between temps and permanent workers would be almost impossible to work out in practice and would add a completely unnecessary layer of bureaucracy for employers and agencies,” she said. “This in turn would limit job opportunities for thousands of workers at a time when it is crucial that we keep the labour market ticking in a challenging economy.”