Alongside Indeed’s 2024 Jobs & Hiring Trends Report, we spoke to Indeed’s economic expert Jack Kennedy about some of the key hiring trends and challenges facing employers in a rebalancing – but still tight – labour market. From developments in the field of AI, to continued challenges in hiring low-skilled workers, we looked at some of the issues that will continue into next year, as well as some possible ways for businesses to reevaluate their hiring.
The labour market rebalances
As we enter 2024, the labour market looks to cool and rebalance. This means that vacancies are continuing to fall from their peaks, and wage growth is easing back. According to Kennedy:
‘Our expectations are that hiring conditions are likely to get gradually easier. We’ve been in this period where hiring conditions have been tough, the labour market’s been out of balance, we’ve had far more vacancies than staff to fill them, we’ve been experiencing staffing shortages across a range of sectors.
“But it has been easing in the last 9 – 12 months, and the expectations are that’s likely to continue, so I think in terms of overall ease of hiring, that’s likely to get progressively easier, but we expect that to be quite a gradual process’.
However, the latest growth forecast for the UK is looking relatively weak in comparison to the rest of the EU – with the latest forecasts expecting anaemic GDP growth. This creates a challenging picture, with the Bank of England struggling to bring inflation levels under control.
However, the labour market remains tight
The labour market nevertheless continues to be tight, with Indeed using indicators such as the ratio of vacancies to unemployed people to measure this – this remains higher than historical averages. According to Kennedy, it’ll take time for this to normalise back to those averages. He says that: ‘Looking at the different sectors, we saw that some categories in particular continue to see lower levels of jobseeker interest than pre-pandemic, so particularly lower paid and in-person categories have seen lower jobseeker interest'.
Furthermore, employers should note that it’s been hard to ascertain the full labour market picture, due to doubts over the quality of labour force data from the Office of National Statistics. Kennedy says that it’s ‘... quite difficult to assess at the moment. The key reason for that, is that it’s quite difficult to get a clean read on the extent and pace to which the labour market is rebalancing. The ONS has had to downgrade the status of the data to what they call experimental, which means that they don’t have a lot of confidence in the accuracy of it’.
Hiring challenges aren’t set to disappear
As what is a tight market continues to rebalance, we expect this to be a gradual process. This means that hiring challenges won’t disappear overnight. On this, Kennedy says that:
‘What we expect is that vacancies have been falling, they’re already down by about a quarter from their peak, and we expect them to continue to gradually fall back to historical norms/averages. At the same time, given that the outlook for the UK economy is quite weak in terms of the expectations for economic growth, we expect some modest up-tick in the unemployment rate.
“Although we don’t expect that to shoot up, we expect the labour market to soften to some extent, and the unemployment rate to increase a bit from where it currently is. What that means is that this increases the overall ease of hiring, we expect that to become a bit easier’.
The labour supply post-pandemic
Long-term sickness post-pandemic may be impacting the number of people in employment or actively seeking work. According to Kennedy, it has become:
'...difficult to assess the extent to which that’s a problem, and the key drivers behind that. For example, long-term sickness – that’s at a record high. 2.6 million people are not working due to long-term sickness, but the underlying data quality issues mean that there’s quite considerable uncertainty around those figures and the extent to which things are really a problem.
“There seems to be convincing evidence that it is a real phenomenon, but it’s difficult to assess the factors that are constraining labour supply and participation in the UK because of these underlying data quality issues.’
Post-Brexit EU immigration rules and their impact on certain sectors
Even with the economy rebounding from the pandemic, there has still been a strong growth in vacancies, typically where new post-Brexit immigration rules have made it difficult to fill in these gaps. These include sectors such as retail, hospitality, and leisure, which previously had access to workers from the EU when freedom of movement to the UK was an option.
Kennedy says that Indeed have seen a: ‘... strong pick up in the international higher skilled, higher paid end of the labour market. For areas like tech, professional services, healthcare roles, and the post-Brexit immigration regime is more favourable to those types of higher paid, higher skilled roles. We’ve seen quite a big uptick in jobseeker interest from the rest of the world, from non-EU jobseekers. So for those employers looking to recruit, that’s definitely something to consider.’
It is therefore becoming – in relative terms – easier than it was pre-pandemic to hire for remote work such as managerial or tech talent from outside the UK due to new immigration visa options for high skilled workers.
Remote working candidate preferences vs employer push to return to office
Candidates continue to favour flexibility, remote, and hybrid working options as a benefit. According to Indeed data, there’s a sharp increase from pre-pandemic levels in terms of the number of people using Indeed to search for remote work. In fact, it’s increased by about tenfold since pre-pandemic levels. According to Indeed’s quarterly jobseeker survey, flexibility consistently ranks the highest among specific benefits valued by candidates.
However, many high profile companies with strong branding have pushed for a return to the office. Smaller employers, however, who do not necessarily have as strong an employer brand may be leveraging a push to return to the office. This means, according to Kennedy, that ‘flexible working is quite a powerful differentiator for organisations looking to make themselves more competitive, especially for jobs that are typically quite hard to hire for’.
GenAI is beginning to disrupt the market
Jobs creating and using generative AI are growing rapidly. Kennedy says that:
‘With GenAI jobs, we’re seeing a hockey stick trajectory. It’s still a very small share of the market, but it’s been a steep upward line. These are jobs like prompt engineers – jobs where people are employed to support generative AI tools, refine the questions that are asked of them to gain more relevant output and jobs around integrating generative AI into business processes, maintaining those tools.
“These jobs didn’t exist before, but we’ve developed a methodology to track their growth. We’re already seeing very rapid growth in those types of jobs, which we continue to expect to see next year.’
“Virtually every job will face some level of exposure to potential GenAI-driven change. But while GenAI can learn to do some tasks reasonably well, it is unlikely to fully replace many jobs— especially those that require manual skills and/or deep personal connections.”
Businesses will have to reevaluate their hiring in 2024
With a tight labour market, many employers have been looking to other types of candidates that they wouldn’t have traditionally considered in the past – despite the market becoming somewhat easier to hire in. Kennedy advises that employers should bear this in mind, while continually monitoring market developments and aligning pay and benefits accordingly. He also states that while some organisations are pushing for a return-to-office, they need to bear in mind that competition may not be doing likewise, putting them at risk of churn, and potential difficulties in hiring if their candidates choose to look elsewhere for roles that offer this option.
Furthermore, smaller companies that do not have the strongest brand presence on the market can leverage the fact that larger tech companies are currently reducing their headcount – making it potentially easier to hire for roles that are typically difficult to fill. This may be promising for smaller brands, as tech talent is usually expensive and time-consuming to hire for.
Flexible options: a leverage point in a tight labour market
Our 2024 Jobs & Hiring Trends Report found employers will continue to face hiring challenges, with those in sectors like hospitality, retail, and leisure struggling to hire for low paid jobs. This is perhaps in part due to a number of factors such as post-pandemic ill health, the impact Brexit has had on the free movement of EU workers, and candidates becoming more interested in roles that offer remote and hybrid options.
Going into 2024, employers will have to reevaluate their hiring strategies as the labour market remains tight, aligning pay and benefits with any changes to the market. Employers pushing for a return-to-office should consider that candidates are still considering flexible work a priority, and this may be a competitive option for smaller businesses looking to successfully hire for hard-to-fill roles like managerial and tech positions. For more insights, visit the Hiring Lab to read the full report.