The British job market is booming. At least, that is what the headline figures would have you believe. Unemployment is at historic lows, and the employment rate is climbing. But beneath the surface, a recruitment veteran of 30 years has pulled back the curtain on what is really happening in the labour market. And the picture is far more complex than the official statistics suggest.
Speaking exclusively to this paper, the veteran, who has placed tens of thousands of workers across finance, tech and manufacturing, shared the secrets that have kept him ahead of the curve for three decades. His first revelation: the official data is lagging. 'The ONS figures are like looking in the rearview mirror. By the time they are published, the job market has already shifted,' he said. 'We are seeing a divergence between what the big surveys say and what we see on the ground.'
What he sees is a market that is bifurcating. On one side, there is a desperate scramble for talent in certain sectors, driving up wages for engineers, data analysts and healthcare workers. On the other, a growing pool of overqualified candidates struggling to find roles that match their skills, particularly among older workers. 'The boomerang generation is real. People in their 50s and 60s who thought they had retired are coming back because their pensions have been eroded by inflation. But they find the market has changed. Employers want digital natives, not experienced heads.'
His second secret is that the so-called 'Great Resignation' was a misnomer. 'It wasn't a resignation, it was a reshuffle. People quit to go to higher-paying jobs, not to sit at home. The labour market has become more fluid, but that is not necessarily good for productivity. There is a lot of churn without much improvement.' He pointed to the rise of 'job hopping' as a symptom of stagnant real wages. 'When inflation is eating your salary, you have to keep moving just to stand still. That is not a healthy market, it is a treadmill.'
The third secret is the most damning for policymakers. The veteran claims that government schemes to boost employment have been a colossal waste of money. 'The Kickstart programme, the apprenticeships initiatives, they are all designed by people who have never recruited anyone. They produce statistics, not jobs. The real job creation is happening in private sector firms that are too small to feature in government data.' He singles out the rise of the 'gig economy' and zero-hours contracts as a double-edged sword. 'They provide flexibility, but they also mask underemployment. You might have a job, but if you cannot get enough hours to pay the bills, are you really employed?'
So what does this mean for the economy? The veteran's analysis is stark. The Bank of England is fighting inflation with interest rate hikes, but the labour market is not behaving as it should. 'Tight labour markets normally push wages up, and that feeds inflation. But the data shows wage growth has been modest because employers are using other levers: cutting hours, outsourcing, or hiring from abroad. The MPC is flying blind.' He predicts that the official unemployment rate will soon tick up, as the lagging indicators catch up with reality. 'The market is topping out. We will see a correction within the next six months.'
For investors, his advice is to watch the quit rate rather than the unemployment rate. 'When people stop leaving their jobs voluntarily, that is the canary in the coal mine. It means they are scared. And scared workers do not spend money. That is when recession is coming.'
As for the government's 'Make Work Pay' agenda, he is contemptuous. 'You cannot make work pay by fiat. You need a booming private sector that creates high-quality jobs. All this regulation and red tape is doing the opposite. It is making it more expensive to hire, so firms are hoarding cash and investing in automation instead. That will destroy more jobs than it creates.'
The recruitment veteran has seen four recessions, three booms and countless policy changes. His final word: 'The job market is a mirror of the economy. Right now, it is reflecting a distorted image. The question is whether we can clear the glass before the cracks become permanent.'
For investors, the takeaway is clear. Ignore the headline numbers. Look at the churn, the quit rate, and the real wage figures. The boom is not as solid as it seems. And when the next downturn comes, the recruitment oracle will be the first to know.
