London jobs market struggles to recover from impact of hybrid working

London’s jobs market is languishing well below its pre-pandemic levels as the capital continues to adjust to the impact of hybrid working, new data shows.

Job postings across London are tracking 19 per cent lower than in February 2020, according to Indeed, well below the national average. Across the rest of the UK, job postings are five per cent lower than pre-pandemic levels.

“The persistence of hybrid working and slowing in many professional services sectors continue to be factors weighing on hiring demand in the capital,” the report noted.

Job postings in the accounting sector were down 18 per cent compared to January 2020 while the legal sector was tracking 28 per cent lower.

The worst hit sector in London was software development, where job postings were 49 per cent below January 2020.

The figures reinforce data released by KPMG and REC in January, which showed that the number of vacancies in London fell for the tenth month in a row in December.

Indeed’s figures showed the continued to show importance of flexible working to employees, with nearly 16 per cent of job postings across the UK mentioning the potential for remote work or hybrid work.

Looking at the country as a whole, Indeed’s data shows that UK job postings are below pre-pandemic levels in a sign that the labour market continues to loosen – albeit slowly.

Normally, January sees a jump in hiring as demand rebounds. However, this year there was only a 0.2 per cent increase in postings, the weakest January rise in six years.

“The question in 2024 is whether the job market stabilises or retreats further,” Jack Kennedy, senior economist at Indeed UK commented.

“The Bank of England is hoping the continued fall in vacancies will mean wage growth easing from its current elevated levels, paving the way for interest rate cuts later this year.”

Rate-setters at the Bank are paying attention to developments in the labour market for indications about how its interest rate hikes are impacting the economy. The Bank is particularly concerned that elevated wage growth might keep inflation above the two per cent target in the medium term.

Revised figures from the Official for National Statistics (ONS) released earlier this week showed that unemployment was 3.9 per cent, lower than previously expected. A tight labour market enables high wage growth.