This week’s Royal Bank of Scotland Report on Jobs survey revealed a rebound in the number of people placed in permanent jobs during January.

Scotland’s ongoing skill shortages drove further increases in salaries and wages.

“At 54.7, the seasonally adjusted Permanent Placements Index rose from 46.8 in December to post above the neutral 50.0 threshold and signal an upturn in permanent staff hires for the first time in four months,” said the report.

“According to Scottish recruiters, improved demand for permanent staff and new projects supported the upturn at the start of the year.

“However, a sharp and accelerated fall in temp billings was also recorded in January.

“Turning to vacancies, growth of permanent roles slipped to a two-year low, while demand for temp staff fell for the first time in 28 months.

“Nonetheless, pressures on pay remained strong as the cost-of-living crisis and skill shortages drove further increases in salaries and wages.”

Scotland went against the broader UK trend, which recorded a fourth successive monthly decline in permanent placements at the start of 2023.

“Permanent starting salaries in Scotland continued to rise sharply in January,” said the report.

“Though the respective seasonally adjusted index ticked down from December’s six-month high, the latest reading was comfortably above the survey average and signalled a much faster upturn than the UK average.

“Candidate shortages and increased living costs were the main drivers of pay growth in the latest survey, according to recruiters.

“January data revealed an accelerated rise in average hourly pay rates for temporary staff in Scotland.

“Temp wages rose markedly and at the second-fastest pace on record with recruiters linking the latest rise to the cost-of-living crisis and skill shortages.

“While temp wages across the UK as a whole also rose at a quicker pace, the upturn remained slower than that seen in Scotland.”

Sebastian Burnside, Chief Economist at Royal Bank of Scotland, said: “The bounce back in permanent staff hiring across Scotland was a positive start to 2023, after having declined throughout the last quarter of 2022.

“Mentions of higher client activity and new projects suggest perhaps a brighter prospect for the year ahead than previously expected.

“However, while firms have been successful in securing new permanent starters in January, total demand for permanent staff moderated further, with vacancies rising at the softest pace in nearly two years. At the same time, demand for temporary workers fell for the first time in 28 months.

“The data indicates a shift in the market with a preference for permanent staff.

“However, lingering concerns over the economic outlook and intense cost pressures at firms indicate that recruitment decisions may be under more pressure in the months ahead.”