The Bank of England's UK employment trends survey has shown that employers fear a recession and are cutting back on new hires.
The UK jobs report found that the number of employers hiring sank to its lowest since 2009, excluding the Covid-19 pandemic, while the number of job seekers looking for work remained steady.
One analyst said the report, compiled by S&P Global, said the economy was showing clear signs of stress after 14 consecutive interest rate rises and put pressure on the central bank's monetary policy committee to halt further increases in the cost of borrowing at the next meeting later this month.
The jobs report supported a swift conclusion to the MPC's tightening cycle, said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
The index of permanent staff placements dropped from 40.9 in July to 38.9 in August. In the second half of the 2010s, it averaged 54.2 in the second half and 55.3 in 2022, Tombs said. A number below 50 is a contraction.
The permanent staff availability index, which measures the number of people using recruiters to look for work, edged down to 60.3 in August, from 61.4 in July but remained well above its 38.0 average in the second half of the 2010s and its 37.6 average in 2022.
Salary rises also remained generally steady in August, with the permanent staff salaries index at 58.2 in August compared to 58.3 in July. In the second half of the 2010s, it averaged 60.0 in the second half of the 2010s and 71.8 in 2022, Tombs said.
The MPC regularly comments on REC surveys in its quarterly assessment of the economic outlook, serving as a benchmark for the recruitment market's well-being.
Tombs said that the REC survey had proven to be too gloomy in signalling declining employment over recent months compared with official employment data from the Office for National Statistics.
In August, a separate survey of employers by S&P Global revealed that they were still adding to their workforces, though only modestly.
We think the reality lies somewhere between the REC and S&P surveys, and that employment likely will flatline in the second half of this year.