The latest evidence to signal that the credit crunch is hitting the recruitment industry was revealed in November's Report on Jobs, compiled by the Recruitment and Employment Confederation (REC) and accountancy firm KPMG.

The report showed a continued deceleration in the growth of permanent placements in November, hitting a 21-month low, with the rate of inflation of permanent staff salaries reaching a 16-month low last month, well down on July's nine-year peak. In contrast, the number of people placed in temporary positions posted a robust increase with 40% of panellists recording a rise.

Alan Nolan, director at KPMG, commented: "What we are seeing is that the credit crunch is tightening its grip over the economy. While the job market remains broadly robust, Report on Jobs suggests an underlying weakening with both demand for permanent staff and vacancies down on the levels earlier this year."

Job vacancy rates increased slightly from October's 17-month low but remained below the 2007 average. Broadly similar rates of demand growth were recorded for permanent and temporary/ contract staff.

Demand for staff edged up to a four-month high with the seasonally adjusted Staff Vacancy Index rising to 60.6 in November, up marginally from 60.1 in October. The index for permanent staff rose marginally from October's 17-month low to reach a four-month high of 60.7 in November but remained below the 2007 average of 61.8. Data revealed that demand for temporary workers has grown to 60 from 58.9 in October, the highest since July.

Jobcentre vacancies signalled a year-on-year increase for the 13th successive month in October. However, the rate of growth eased slightly from 11.6% to 11.2%.

Growth of online recruiting remained strong in the second quarter of 2007 and internet job advertising was up 35.7% compared to last year.

The strongest sector expansion was recorded for engineering and construction (66.2), up from 62.8 last year. The slowest growth rate was in blue collar (55.5 down from 59.4) and hotel and catering (57.8 down from 58.1).

Recruitment consultancies continued to struggle finding suitably qualified candidates to fill job vacancies during November. Skill shortages among permanent staff were most prevalent in accountancy, IT, professional, secretarial, hotel and engineering jobs. For temporary posts, secretarial, accounting, hotel, engineering and driving skills were in short supply. The number of permanent staff available declined for 49th consecutive month in November, recording a seasonally adjusted index of 42.9. The availability of temporary staff continued to fall in November but the rate of deterioration remained the same as last month.

Candidate availability in November was up to 42.9 from 41.7 last month. Meanwhile, availability for temporary workers remained the same at 48.4. Salaries for permanent workers continued to rise in November but the rate of inflation slowed to a 16-month low. Hourly pay rates continued to rise for temporary staff in November and the rate of inflation quickened to a four-month high.

Overall UK employment rose by 69,000 to a record high of 29.22m in the three months to September. However, employment growth has clearly slowed during 2007 and unemployment rose by 6,000 to 1.67m, according to the Office for National Statistics.

The financial services sector, a key driver of jobs growth, saw a decline in vacancies during the three months to October amid the fall-out from the credit squeeze.

Helen Reynolds, REC's acting chief executive, said: "This month's Report on Jobs highlights the value of a flexible workforce for employers. If businesses are to continue to benefit from temporary workers it is essential that we do not limit job creation opportunities through additional regulation, such as the Agency Workers Directive being discussed in Brussels."

l A figure of 50 on the report = no change on the previous month's level; above 50 = an increase; below 50 = a decrease.



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