A jump in redundancies has triggered the biggest surge in jobseekers for two and a half years as the employment market is hit by rising interest rates.

The number of vacancies in June climbed at the slowest pace in 28 months, with a significant drop in permanent placements, according to the KPMG and the Recruitment and Employment Confederation (REC) UK Report on Jobs survey.

Staff availability rose for the fourth month in a row, with the supply of both temporary and full-time workers surging at the fastest pace recorded since December 2020.

The data suggest that higher interest rates are beginning to deter companies from recruiting more workers - a change that, if sustained, should ultimately reduce wage growth and help to slow inflation.

Claire Warnes, partner in skills and productivity at KPMG UK, said the sharp upturn in candidate availability reflected increasing redundancies across multiple sectors and is a “big concern” for the economy.

Recruiters said companies became reluctant to take on new staff in June owing to the darkening UK economic outlook, particularly as the rising cost of living and competition for skilled workers have pushed up wages.

Wage growth could soon be on the turn. Upwards pay pressure slumped to its lowest level in 26 months, with rates of starting salary and temp wage inflation falling to more than a two-year low.

Ms Warnes said: “Employers are also tending towards temporary hires, given lingering economic uncertainty.”

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