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Rob Wood, chief economist at Pantheon Macroeconomics, said rising employment and wage gains suggest the Bank of Engand’s monetary policy committee needs to be cautious.
There may be an element of a “Burnham Bounce” in the survey, as the drop in temporary hiring and rise in permanent in July—usually a sign of falling uncertainty—sits oddly with the resumption of hostilities in the Middle East in July. So Sentiment could easily drop back somewhat.
Wage growth accelerated to the strongest since January, and the permanent salaries index lies above the 52.3 average seen in 2025, suggesting there has been no slowdown in pay growth over the past 18 months. Vacancy growth recovering and staff availability high but easing slightly also point to a labour market beginning to steady.
Most surveys, with the exception of the PMI, are now consistent with rising employment and wage growth plateauing at an above-inflation target-consistent rate.
Introduction: UK employment market shows ‘rays of light’ for jobseekers with upturn in pay, study shows
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
There are signs of improvement in the UK jobs market, with an upturn in pay and the first rise in temporary vacancies in two years as employers sought more flexibility.
Permanent job placements stabilised in July and temporary billings rose further, at the fastest pace since early 2023, according to a monthly survey from KPMG and the Recruitment and Employment Federation.
Recruiters said demand for permanent staff remained subdued amid political and economic uncertainty and higher labour costs, though some employers continued to hire for new projects.
Callum Licence, head of advisory at KPMG UK and Switzerland, said:
Despite ongoing uncertainty it’s encouraging that businesses are starting to press ahead with investment, which means across the board we are starting to see the data moving in the right direction. This is most pronounced in the continued rise of temporary work, where employers have been looking at flexible approaches and hiring has been growing for several months, and permanent hiring is starting to turn a corner.
Temporary workers are in demand across the UK and though modest, the rate of growth was the fastest seen since August 2023. At the same time, permanent vacancies fell at a slower, but still solid rate. As a result, overall demand for workers fell at the softest pace in 22 months.
Pay continued to improve in July, with recruiters often talking of a lack of suitably skilled or experienced candidates for roles. The rate of starting salary inflation was solid, reaching the highest level in six months, while temp wage growth hit a 26-month high. However, the upturn in starting salaries remained much slower than the long-run trend.
Appointments to permanent positions stabilised ending a 45-month period of decline. London and the Midlands recorded renewed upturns in permanent staff hiring in July, with growth hitting a near four-year high in the capital, but there were further declines in the south and north of England.
Growth in temporary billings slowed from June’s 38-month record, but was among the best recorded since early 2023. The north of England recorded the steepest upturn in temp billings, followed by London. A softer increase was seen in the south of England, while billings fell slightly across the Midlands.
Maxine Bligh, REC’s chief membership and innovation officer, said:
Rays of light are beginning to break through for the job market as employers revive hiring plans. Temporary vacancies are up for the first time in two years, while recruiters’ revenue from supplying temporary workers has risen for a fourth consecutive month.
Remarkably, this is the first month without a decline in permanent placements since Liz Truss resigned as prime minister in 2022, underlining just how prolonged the downturn in permanent hiring has been. That makes it all the more important that the government takes decisions now that build business confidence and momentum in hiring.
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