Shares in recruitment companies
"The UK's Employment Outlook now stands at its strongest level since before the recession," said ManpowerGroup UK managing director, Mark Cahill. This view was supported by the Recruitment and Employment Confederation (REC) joint report with accountancy group KPMG out earlier in the week. "Recruiters are reporting another monthly increase in the number of people they have placed into permanent and temporary jobs and it's beginning to look like an accelerating trend," said REC chief executive Kevin Green.
The report showed the fastest rise in permanent placements for almost two years, combined with a strong increase in temporary billings and a sharp rise in job vacancies "Employer confidence is genuinely bouncing back with businesses feeling more encouraged to hire, which bodes well for the new year," added Mr Green.
And the British economy continued to gather pace with a strong increase in consumer confidence last month, according to the Organisation for Economic Co-operation and Development (OECD). The OECD's composite leading indicators, which anticipate changes in economic conditions, pointed towards "economic growth firming in the UK".
The chance of a new year bounce doesn't change a challenging long-term picture. The OECD still forecasts that unemployment will rise in the UK next year and it recently slashed growth forecasts from 1.9 per cent to 0.9 per cent for next year. The Office for Budget Responsibility added to the gloomy prognosis and thinks the worst is still to come, with unemployment not peaking until 2014.
Recruitment sector shares still trade on a forecast PE ratio of 17.4 times, which is a premium to the wider support services sector on 11.8 times. The balance sheets look solid with net cash, and the dividends are attractive, but volatility will remain until the long-term picture improves.