The UK's part-time hiring index has reached a three-year high, according to recent data. The index, which measures the pace of part-time hiring, rose to 52.7 in June, up from 52.2 in May and comfortably above the 50-point mark that separates growth from contraction.
For small to medium-sized businesses, the logic behind this hiring trend is clear. Stronger economic activity is creating a need for extra hands, but with rising employer National Insurance, minimum wage increases, and new employment rights, few are willing to lock in fixed payroll costs that would be hard to unwind if growth stumbles again.
Temporary and contract work is once again leading the way, as firms react to demand without committing to larger-scale permanent hiring. This strategy has been used by smaller firms before when the outlook turned uncertain.
The permanent hiring index also showed signs of improvement, jumping to 49.1 in June from 44.1 in May. Although still below the 50 threshold, the pace of decline is the slowest in some time.
The labour market is picking up steam, with unemployment rates rising slightly to 4.9 per cent in the three months to April. However, the number of vacancies has fallen to a five-year low of 707,000, and long-term unemployment has climbed to a decade high.
Despite the challenges, candidate supply remains plentiful. The index measuring full-time jobseekers dipped to 60.2 in June, while temporary candidate availability fell to 59.3. Both remain well into growth territory, leaving firms with a deeper talent pool than at any point in recent years.
Separate figures suggest that wage pressure has plateaued, with workers receiving an average pay rise of 3.5 per cent in the three months to May. Nearly half of settlements landed between 3 per cent and 3.99 per cent, just over a third exceeded 4 per cent, and one in ten workers secured more than 5 per cent.
The labour market's performance could influence the Bank of England's decision on interest rates. Continued weakness in the jobs market could persuade rate-setters to leave borrowing costs at 3.75 per cent for the rest of the year, welcome news for any small firm carrying variable-rate debt.
