Tag: Labour market

What Economic Shocks and AI Are Really Doing to the European Labour Market

If the European labour market feels confusing right now – that’s because it is. On the surface, the signals seem contradictory – hiring is slowing and budgets are tightening – but at the same time, skills shortages persist, competition for talent remains intense in certain areas, and AI is beginning to reshape roles in real time.

In a recent episode of the HR Means Business podcast, I spoke with Julius Probst, PhD – Senior Economist at Appcast, Inc and Director of Research of Recruitonomics – to try and unpack what’s really happening beneath the headlines – and what HR leaders need to do next.

A slowdown – but not a collapse

Julius was clear from the outset: this is not a structural breakdown of the labour market. However what we are seeing is a cyclical slowdown, driven by external shocks – most notably rising oil prices linked to geopolitical tensions. The impact is familiar: higher inflation, sustained interest rates, reduced consumer spending, and slower job creation.

In the UK, for example, this could push GDP growth down to around 0.5%, bringing the economy close to stagnation. Unemployment has already edged up to 5.2%, and workers have far less freedom to move roles than they did just two years ago.

For employers, that translates into fewer vacancies, more applicants, and reduced wage pressure – at least at headline level.

However this is only part of the story.

The rise of a three-tier labour market

I think one of the most important insights from our conversation is that averages are misleading.

Right now, three very different labour markets are operating simultaneously:

The first is AI talent, where demand is accelerating rapidly. Organisations are competing hard for individuals with the skills to build, implement, or work alongside AI systems.

The second is skilled trades — engineering, construction, and technical manual roles — where shortages remain acute. Brexit has intensified these gaps, and wages are rising accordingly.

The third is routine white-collar work, which is where the pressure is most visible. Administrative, customer service, and back-office roles are increasingly being automated, and hiring has slowed significantly.

In some cases, this is creating an unexpected reversal: skilled tradespeople can now earn more – and enjoy greater security – than graduates entering routine office roles.

AI is already changing the shape of work

AI is often seen as a future trend – but it’s not as it is already showing up in the data.

One of the clearest signals is the decline in graduate hiring. Organisations are using AI to reduce the need for entry-level roles, particularly in areas involving repeatable or process-driven tasks.

Julius was careful not to be alarmist however, as he compared AI to previous general-purpose technologies – from electricity to the railways – which disrupted existing jobs but ultimately created new industries and opportunities.

The reality is that the transition is uneven. Right now, younger workers are bearing the brunt. The people who most need to develop AI-related skills are finding it harder to access the workplace where those skills can be built.

A more cautious workforce

Candidate behaviour is shifting as jobseekers become more cautious – and less willing to move roles in an uncertain market – whilst at the same time, competition for jobs is intensifying, particularly in white-collar roles.

AI is adding another layer of complexity because job candidates can now submit large volumes of applications quickly, which increases noise and makes it harder for recruiters to identify the talent they need.

What should HR leaders do now?

Julius’s advice for HR leaders was pragmatic – and grounded in reality:

First, accept that volatility is the new normal. Economic shocks are no longer rare events. Workforce planning needs to be more dynamic, more responsive, and more frequent.

Second, don’t abandon early-career hiring entirely. Demographic trends are indicating that large numbers of experienced workers will retire in the next three to five years. Organisations that stop building their pipeline now risk a significant talent gap later.

Third, think sectors, not generialist. The impact of economic shocks will vary widely. Hospitality, transport, and energy-intensive sectors will face far greater pressure than technology or financial services.

And finally, treat flexibility as a strategy, not a perk. Hybrid working, for example, isn’t just about employee preference – it enables organisations to access talent beyond expensive urban centres, helping to reduce salary pressures, and improve retention.

Reading the signals

What stood out most from our conversation is that this isn’t a chaotic labour market – but it is a complex one.

The signals are there. But they’re uneven, nuanced, and often contradictory. The organisations that succeed will be those that move beyond headline numbers, understand the specific dynamics in their sector, and make deliberate, forward-looking decisions.

Because the labour market isn’t breaking – it’s evolving.

And the question is whether we’re paying close enough attention.

You can listen to our full podcast chat here – https://www.hrhappyhour.net/episodes/what-ai-and-economic-shocks-mean-for-work-in-europe/ – or through the image below

80% of Temporary Workers want a Permanent Job!

I keep hearing that flexible working is here to stay and I keep getting told that most people choose to work this way. Which is funny, as most of the newly temporary/part time/self-employed that I come across DON’T seem to want to work that way. They are fearful of finding enough hours, and earning enough to meet commitments.

Interim and temporary recruiters that I spoke to before Christmas said that one of their biggest challenges was that their candidates were now mainly looking for permanent work.

And these are people who are earning professional pay rates – not the low-pay part timers who make up today’s underemployed (as blogged here by Michael Carty).

So, do they want to work this way?? I’ve looked at the official figures…

In the most recent ONS Labour Market report the number of temporary workers is 1,620,000. Look further along the line below and you see reasons for temporary working, and under ‘Do not want a permanent job’ the figure is 325,000. That’s right…only 20% of temporary workers DON’T want a permanent job.

Unsurprisingly this has worsened during the recession. If we look at the figures for September 2008 (average of May – July 2008) there were 1,404,000 temporary workers, of which 405,000 didn’t want a permanent job.

So in the 4 years since the market turned we’ve added 216,000 temporary jobs, yet the number of people not wanting a permanent job has fallen by 80,000.

If we compare the comparative figures for part time work then you get a higher proportion who say that they don’t want fulltime work, which is understandable – these numbers will include people who are working parents, carers, semi-retirees and independently wealthy so will include a higher proportion who choose that arrangement.

Even here though there has been a similar change between 2008 and 2012. Now 5,273,000 out of 7,935,000 don’t want full time work whereas in 2008 it was 5,238,000 out of 7,353,000.

So since the market turned we’ve gained 582,000 part time workers…but the number of those not wanting full time work has only increased by 35,000.

This isn’t a surprise to me.

When the recession started I was placing HR interims. I worked with a pool of day rate interims that had chosen to work that way. Few wanted to work that way forever though, some were doing it for a few years – usually until the kids were older, or until they completed another project (often a second business or property development). Most said they wouldn’t rule out a permanent job.

And then the recession started and a whole bunch of newly unemployed HR specialists, at all levels, suddenly had to set themselves up as self-employed. Overnight they went from being an employee to becoming their own sales manager, marketing manager, accounts manager, credit control manager, procurement manager and IT manager.

As FlipChartRick says, self-employment isn’t for everyone.

So flexible working may be inevitable, and I happen to believe it is, and we all know a few people who now work that way – but that doesn’t mean that they all want to or can afford to.