Demand for permanent staff in the UK fell for the first time in five years, according to June's Report on Jobs from the Recruitment and Employment Confederation (REC) and KPMG.

The survey signalled a further weakening of UK job market conditions, with temp billings rising at the weakest pace in five months and firms' demand for contracted staff falling for the first time in five years.

Demand for temporary workers eased to the weakest pace since May 2003, but inflation of wages and salaries accelerated despite a strong rise in candidate availability.

The poll of recruitment agencies and employers said shrinking job opportunities meant there was a bigger pool of candidates chasing permanent and temporary work.

Kevin Green, chief executive of the REC, said it was the first major sign that a slowing economy is starting to have an impact on jobs.

"The decline in the demand for permanent staff for the first time in five years indicates that employers are hesitating before making recruitment decisions.

"The continuous growth of temporary recruitment shows that this is being used to meet peaks and troughs in business workloads. We anticipate that in this worsening economic climate, businesses will go to great lengths to retain the staff that they have worked hard to acquire in the past few years.

"It's also vital that jobseekers keep in mind that there are still numerous positions to fill and recruitment agencies will be working hard to search for the right talent to meet employers' needs."

In a sign of further labour market loosening, the supply of available candidates continued to improve in June. For both permanent and temporary staff, the latest rises in availability were the strongest since July 2003.

Recruitment consultancies reported stronger rises in both permanent and temporary staff pay during June. In both cases, wage inflation accelerated to three-month highs, but remained well below the respective trend levels.

Alan Nolan, director at KPMG, added that the "sobering figures proved the credit crunch had taken its toll" and is now "severely weakening" the UK jobs market.

"Many employers now seem to be accepting the inevitable — they will have to cut costs by laying off people because their businesses won't be growing as much as they could have expected a couple of months ago," Nolan said. "We have already seen widespread redundancy programmes in the City and among house builders, and there are more to come. Even the usually robust temporary jobs market is coming under pressure, adding to the likelihood of a stagnant jobs market and rising unemployment for the foreseeable future."

Meanwhile, the Monster Employment Index UK decreased by four points in June to reach a level of 177, seven points higher than a year ago but 15 points short of its February peak. Hiring in the marketing, PR and media sectors were the biggest fallers, while there was a strong upturn in demand for hospitality and tourism workers.

Online hiring activity decreased moderately in the UK in June, following a slight rebound in May. The marketing, PR and media sector registered the steepest decline, while job availability in the sales sector dipped for the fourth consecutive month.

Opportunities increased significantly in hospitality, tourism, healthcare and social work, while the arts, entertainment, sports and leisure sectors surged year-on-year.

Among occupational groups, opportunities for craft and related workers declined most over the past month and during the second quarter. Regionally, online hiring in Wales, Scotland and North England dipped the most, while London and the South-West decreased for the fourth successive month.





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