The job market faced “extremely challenging conditions” in May as permanent and temporary placements continued to fall sharply amid lockdown, according to new research.
The Royal Bank of Scotland’s labour market report found the drop in permanent placements in May was the second steepest in more than 17 years of data collection and extended the current “sequence of decline” to four months.
Many firms said they continued to put hiring decisions on hold due to “substantial uncertainty” surrounding the coronavirus pandemic.
Temporary placements across Scotland also declined in May, as has been the case in each of the past six months, with respondents linking the fall to the pandemic and subsequent drop in demand for staff.
Meanwhile, salaries for new permanent staff fell at the quickest pace on record, with the reduction in starting salaries the most severe since data collection began in January 2003.
Sebastian Burnside, chief economist at RBS, said: “The Scottish labour market continued to face extremely challenging conditions in May as lockdown restrictions to combat the Covid-19 pandemic continued.
“Both permanent staff appointments and temp billings continued to fall rapidly, with the declines the second-quickest on record after April.”
He added: “Meanwhile, demand for staff continued to drop substantially amid heightened uncertainty over the outlook, while firms reduced pay rates to minimise costs.
“Permanent starting salaries declined at the quickest rate on record and temp pay rates fell to the greatest extent since April 2009.
“Government support and furlough schemes have been vital to steadying the labour market, but it will be an immense challenge to get business back on its feet and for economic conditions to recover from the pandemic.”
The report also noted a further reduction in average hourly pay rates for short-term staff in May, with the rate of decline the quickest since April 2009 and marked overall.
Recruiters in Scotland said the number of permanent candidates available continued to fall in May, continuing a trend of more than eight years, though the latest fall was the softest since September 2016 and only modest overall.
There was a “substantial” increase in the number of temporary candidates, however, with the fastest rise in temporary staff availability since August 2010.
Respondents frequently linked the rise to job cuts and redundancies amid the Covid-19 pandemic, which resulted in a higher number of job seekers.
The May data also highlighted a drop in permanent vacancies in Scotland, as has been the case in each of the past three months.
Temporary vacancies also dropped for the third successive month in May.
The rate of decline softened from April’s record but was still the second sharpest in more than 17 years.
The report, compiled by IHS Markit, is based on a monthly survey of around 100 recruitment and employment consultants.