Charlie Ball, Jisc's head of labour market intelligence, makes his annual forecast of what's to come in the labour market in the year ahead - after looking back to see how his previous predictions fared…
As is traditional, I'm going to take a look at five potential developments in the UK graduate labour market in 2025, but first, I'm going to do another traditional thing and mark my own homework from this time last year so you and I can decide if it's worth listening to my predictions.
Reviewing 2024 predictions
The coming General Election will make the graduate labour market an electoral issue, and this will have no real impact on the actual graduate labour market in 2024 (it might have an impact on 2025).
The graduate labour market did turn up as an electoral issue with the then Conservative government making dire warnings about 'low quality' courses. Of course, they didn't get to make good on any of those threats. What I was actually thinking about here was whether either the outgoing government or the incoming one (I did expect a change of government, because, well, I can read opinion polls) would pull any of the levers available to them to address some of the very serious occupational shortages in the public sector, and whether business would expect them to and react accordingly.
I concluded that for their own reasons, neither main party were going to in 2024, and I was right. The new Labour government did make a fairly substantial pay award to public sector professionals to end long-standing pay disputes though, and anecdotally that seems to have had a positive impact on retention in roles like teaching, but to bring staffing to where we'd like it to be will take a lot more work. As we'll see, I think 2025 might be different.
AI will continue to impact recruitment more than employment, and it will, at least in the short term, increase cost-per-hire.
AI has not yet had much real effect on the number of graduate jobs available and I'm increasingly sceptical that it will. But as the Institute of Student Employers reported in October, it's massively increased applicant volumes, meaning that recruitment costs more to administer.1 I was correct here.
Labour shortages will ease a bit, but they are here to stay in many areas.
Again, I was right here, the air gently came out of the graduate labour market, and some shortages in business services and parts of IT eased off, but we simply don't have enough nurses, or teachers, or doctors, or engineers, or coders or… and I could list many more specialist occupations. I could make the same prediction for 2025, but that would be cheating a bit because I can 100% guarantee that it's going to continue to be the case and I don't want this piece to be 'most of the things that happened in 2024 still follow'. Even though it could be.
Hybrid working is definitely here to stay.
This is an interesting one, and I'm going to return to it this year. I got this broadly right but it's also clear that RTO (Return to Office) mandates are getting louder and more insistent and perhaps more than I expected. Check out my 2025 predictions on this one.
But business is running out of road on keeping wages down.
One of the features of the last few years has been the relative willingness of professional workers to take other benefits (like increased hybrid working) in lieu of pay increases. This means that salary comparisons are less useful in gauging the relative value of university than they used to be. But cost of living increases meant it was clear that workers wanted cash not benefits in 2024, and so we ended the year with annual growth in employees' average earnings for both regular (excluding bonuses) and total earnings (including bonuses) at a chunky 5.2%.2 That pay award to public sector workers did bring public sector wage increases to 4.3% but it was the private sector, at 5.4%, that saw the biggest growth. So I was kind of right here, but also really rather vague.
The jobs market simply isn't as strong as it was a year ago and so I expect those key numbers on employment to be headed down.
What to look for in the 2025 labour market
So what about 2025? The most obvious event to keep an eye on, and the one that will have a big impact in 2025, is the election of Donald Trump in the US and the likely disruption he'll bring to the global economy. And in the UK, as 2024 went on, the labour market, which had become quite uncoupled from wider economic performance due to a lack of staff in many areas, started to come back into alignment as worker shortages abated somewhat (although not entirely). Here are my predictions for the coming 12 months:
As the economy subsides, so will the graduate labour market.
The economic news was not great in the latter half of 2024, we're in economic contraction again, the increase to National Insurance that came in with the Budget has spooked employers a bit. The latter was far from unexpected, but now businesses can see the effects on wage bills and balance sheets, they're signalling caution.
The Recruitment and Employment Confederation, REC, who are a group covering employment agencies, an excellent early indicator of employment shifts, reports a sharp decrease in permanent hiring and an upping of temps3, while the British Chambers of Commerce, who look after smaller businesses across towns and cities in the UK, notes concerns about tax and a worrying low level of commitment to investment.4 And this is before President-elect Trump brings in the tariffs he has promised, which will hit global business and economic prospects in general further, with the UK no exception.
The next round of Graduate Outcomes data for 2022/23 graduates will show higher early graduate unemployment, lower levels of professional level employment - and more postgraduate study.
The new survey is in the field as I write this and will be looking at how graduates from 2022/23 were doing 15 months after graduation in winter 2024. The jobs market simply isn't as strong as it was a year ago and so I expect those key numbers on employment to be headed down (although I'm not sure it will be a big change). However, postgraduate recruitment is what we call countercyclical - it goes up in more difficult jobs markets - so I expect to see that go up a little when we get the new data next year. And I do think this summer's recruitment for graduates leaving in 2025 will be trickier than it has been since COVID, so support for finalists leaving university in the summer will be vital.
The government will increase public sector recruitment sooner or later.
This Labour government feels it was elected to fix public services, and they spent the last Budget amassing cash to try to do that. Public sector recruitment and retention is in a tricky state right now with health, social care, education, policing, prisons all understaffed and under strain and although some belated pay rises might help somewhat, some of these workforces are finding it very difficult to maintain services.
The government has the power to do something about this and, especially if it continues to struggle with popularity, will be increasingly likely to do something to alleviate staffing issues and show that they have the problem in hand. Expect to see some moves on graduate recruitment in 2025, probably in prisons, probation and teaching first as these have some of the clearest issues.
AI may not take your jobs but it's a headache in recruitment.
As the ISE have been telling us in detail, AI is not, so far, displacing loads of jobs as might have been feared a couple of years ago, but it's still having quite an impact. AI is good at writing covering letters and CVs, and so it makes sense for candidates to use them, and so they do. That means it's a lot easier for candidates to write a lot of relatively good job applications, quickly, and so that's exactly what they do.
This means everyone is applying for all the jobs available, so even though there are actually more jobs than there used to be, they're all getting more applicants, all using the same tools, with largely identical applications and recruiters are swamped, which means they have to spend more resources to administer a recruitment round, which ultimately makes recruitment harder and more expensive. That may start to have an effect on vacancy numbers.
What recruiters want to do is encourage applicants to use AI well - after all, it's likely to be a useful business skill - and discourage it being used badly. So they don't want to stop it entirely, but do expect a lot more talk this year about how to limit it being used in applications. And a lot of talk from online hustlers claiming they have a magic solution to make your applications foolproof using AI, of course.
More talk about Return to Office, but action? Not so sure.
Towards the end of the year we started to see more Return to Office (RTO) mandates from employers, particularly in the US, and there has been chatter about whether hybrid working has had its day and is on the way out. The change in US government and the rise to power of tech moguls who are distinctly unimpressed by hybrid working may signal more public arguments in America, and that may have an impact on the thinking of US headquartered multinationals who recruit in the UK. In addition, a weaker jobs market means some of the concerns employers had about losing their best employees and being unable to replace them might also seem to be abating.
But in the UK I don't see widespread RTO being likely this year. For a start, the UK is not the US and hybrid working is more widespread here and will be tougher to reverse. There's also a wider acceptance that it's broadly working for business and employees. And the professional sectors in which its prevalent might have less serious worker shortages than in the last few years, but any employer that expects workers back in the office five days a week will have to be really confident that they can keep the staff they want to keep, and that would apply in few UK industries. All this suggests that we'll probably see a steady diet of CEOs loudly demanding staff come back to offices as 2025 goes on, news stories every so often asking if this is a trend and then not a great deal of change, at least in the UK.
Notes
- 5 trends you need to know from ISE's Recruitment Survey 2024, ISE, 2024.
- Average weekly earnings in Great Britain: December 2024, ONS, 2024.
- Report on Jobs: Steep reduction in permanent staff placements but temp market decline eases, REC, 2024.
- Quarterly Economic Survey Q3 2024, British Chambers of Commerce, 2024.
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