July saw the highest number of permanent placements since May 2004 together with a shortage of skilled or ‘quality’ candidates, according to the Report on Jobs survey from the Recruitment & Employment Confederation and KPMG.

The survey revealed both a growth in the number of permanent staff placed by recruitment agencies and a rise in the number of advertisements.

But skill shortages and a shortfall of quality candidates have prompted a rise in starting salaries for permanent posts plus a rise in rates for temporary posts.

Gareth Osborne, REC managing director, said: “The engineering and construction sector again heads both the permanent and temporary/contract tables. However, the significant leap in the number of permanent executive/professional placements is another very encouraging pointer that business confidence within the market is now returning.”

Michael Carter, people services partner at KPMG, said: “This month’s figures show continuing significant growth in both permanent and temporary placements, but even this has not stemmed the demand for staff.

“Skills shortages continue to be seen, with the result that employers are paying more for ‘quality’ candidates, resulting in robust pay inflation. The figures are at odds with the rising official unemployment figures, which suggests that labour is available, but not with the skills required.

“The introduction of anti-age discrimination legislation in October could begin to address the lack of suitable candidates. As the figures suggest, employers are often reluctant to employ older workers as they are perceived as being more likely to take sick leave, have more accidents and lower productivity, while younger workers are perceived to lack skills and experience.

“However in discriminating against older and younger workers, employers are potentially missing out on the right candidate, and they will have to address these and other issues before the introduction of the legislation.”

The Report on Jobs, published by the Recruitment & Employment Confederation and KPMG, draws on original survey data provided by recruitment consultancies and employers, as well as data on national newspaper recruitment advertising.