Optimism in Job Security and Pay Increases Amidst Growing Concerns
The latest Robert Half Jobs Confidence Index (JCI), developed in collaboration with the Centre for Economics and Business Research (Cebr), reveals a concerning convergence of economic factors contributing to what is being described as a potential ‘perfect storm’. The interplay of high economic inactivity, decreasing labour productivity, and ongoing wage growth is shaping a difficult landscape for the labour market.
Rising Job Security and Pay Optimism
Despite these challenges, the JCI indicates that nearly two-thirds (60%) of workers are optimistic about their job security over the next six months. This marks the highest level of job stability confidence since Q1 2023. Additionally, optimism about pay has rebounded significantly, with confidence in this area increasing by 23.1 points. This surge has pushed pay optimism back into positive territory, representing the strongest quarterly gain among the four pillars measured by the JCI.
The Jobs Confidence Index increased by 5.3 points in the second quarter, achieving a total score of 51.6. This is the highest reading in almost two years. A score between -30 and 30 is considered typical, highlighting the significance of this increase. According to Robert Half, these persistently high levels of job and pay security are indicative of the ongoing impact of skills shortages, which are placing workers in a strong position within the labour market.
Economic Inactivity and Skills Shortages
Matt Weston, Senior Managing Director UK & Ireland at Robert Half, commented on the current state of the labour market: “Labour market tightness remains a constant challenge, as a slight decrease in unemployment is countered by a continued decline in job vacancies. A key driver of this labour market tightness is the elevated levels of economic inactivity since the pandemic, leading to a critical shortage of essential skills. Consequently, worker job confidence is rising, and while wage growth is slowing, it remains above inflation. The primary issue driving worker confidence is the ongoing skills shortages.”
Weston further explained that skills shortages are detrimental to employers and can impede both company and national growth prospects, productivity, and innovation. Conversely, the demand for skilled talent continues to favour workers, granting them substantial bargaining power. Confident in their unique skill sets and experience, workers today are in a position to explore new opportunities if their current employers do not meet their expectations for rewards and career progression. Without increased support from the Government and businesses, the combination of systemic skills shortages and a tight labour market could exacerbate wage growth, potentially leading to a resurgence in inflation. This could significantly hinder economic growth, countering the broader growth agenda.
Implications for Employers and Policymakers
The current landscape presents a dual challenge for both employers and policymakers. While high job and pay confidence reflect the strength of the labour market from the perspective of workers, the underlying skills shortages pose a threat to sustained economic stability and growth. Addressing these issues will be crucial in ensuring that the labour market can continue to thrive while mitigating the risks associated with inflationary pressures.
