The Welsh Labour Market Is Slowing. But That's Only Half the Story

The latest labour market figures suggest recruitment across Wales has become more cautious over the past year. Employment has dipped slightly, payroll growth has levelled off and vacancy numbers are lower than the post-pandemic highs. On paper, it looks like employers are beginning to slow down.

That picture changes when you look beyond the headline figures. Employers across engineering construction and professional services are still struggling to recruit experienced people, while salaries for specialist roles continue to rise. Research prepared for Rhino Recruitment found Wales recorded the strongest advertised salary growth of any UK nation or region during 2026, despite a broader slowdown in recruitment activity. Rather than signalling a weaker labour market, the latest data suggests businesses are becoming far more selective about where they recruit and who they recruit.

The figures point towards a market that's changing rather than shrinking. Employers may be creating fewer vacancies overall, but they're placing greater value on specialist skills, particularly across engineering, construction and professional services. With major investment planned across energy, manufacturing and infrastructure, those hiring decisions are likely to shape recruitment across Wales for years to come.

Recruitment has become more selective

The latest data published by the Welsh Government shows the employment rate for people aged 16 to 64 stands at 72.1%, down 1.3 percentage points over the year and still below the UK average. Early HMRC figures also show the number of people on payroll has remained broadly unchanged at around 1.31 million, while the claimant count has risen slightly compared with the same period last year.

For many businesses, that doesn't reflect a lack of confidence as much as a change in approach. Employers are taking longer to make hiring decisions, replacing key members of staff rather than expanding entire teams and focusing recruitment on positions that directly support future growth. The latest Labour Force Survey also found there were no statistically significant changes across the headline labour market indicators, suggesting the overall picture has remained relatively stable despite the cautious mood.

Recruitment may have become more measured, but demand hasn't disappeared. Employers are becoming increasingly selective about where they invest, concentrating their efforts on positions where experience and specialist knowledge can have the greatest impact.

The skills shortage hasn't gone away

The slowdown in hiring hasn't solved one of Wales' biggest recruitment challenges. Employers across engineering, construction and manufacturing continue to report shortages in the skilled occupations that support many of the country's largest industries.

Research drawing on data from the Welsh Government, EngineeringUK, Make UK, the Construction Industry Training Board (CITB) and the Engineering Construction Industry Training Board (ECITB) found employers continue to struggle to recruit experienced Quantity Surveyors, Mechanical Engineers, Welders, Fabricators, Pipefitters, CNC Machinists, Site Managers and Project Managers. Many of these roles sit at the heart of major engineering, manufacturing and construction projects, leaving businesses competing for a relatively small pool of experienced professionals.

That helps explain why salary growth has remained so strong. Businesses aren't increasing pay simply because vacancies exist. They're doing it because experienced candidates remain difficult to replace, particularly where delays can have a direct impact on project delivery, productivity and commercial performance. As recruitment becomes more targeted, the value placed on specialist knowledge continues to grow.

The pressure is unlikely to ease any time soon, particularly with some of Wales' largest investment projects now moving closer to delivery.

Investment is already shaping tomorrow's hiring

The biggest influence on recruitment may not be found in today's vacancy figures, but in the scale of investment planned across Wales over the next few years.

Research prepared for Rhino Recruitment highlights major developments including the Celtic Freeport, floating offshore wind projects in the Celtic Sea, the continued transformation of Tata Steel in Port Talbot, semiconductor investment around Newport and significant energy and infrastructure schemes across North Wales. Together, they represent billions of pounds of investment and are expected to generate sustained demand for engineers, commercial professionals and skilled trades.

Recruitment for projects of that size rarely begins when construction starts. Engineers, Quantity Surveyors, Health and Safety professionals, planners, procurement specialists and Project Managers are often recruited months, and sometimes years, before work reaches its busiest stages. While headline employment figures provide a snapshot of where the labour market is today, these projects offer a clearer indication of where demand is likely to emerge next.

The effect is already being felt in different parts of Wales, with regional labour markets following very different paths.

The Welsh labour market depends on where you look

National figures provide an overview, but they don't always reflect what's happening on the ground.

The latest Annual Population Survey shows Monmouthshire recorded the highest employment rate in Wales at 78%, followed by Flintshire at 77.5% and Gwynedd at 77.3%. Those figures sit well above the Welsh average and underline how labour market conditions vary across different parts of the country.

Industry research reveals similar differences. Cardiff continues to lead as Wales' largest professional services centre, while Newport is strengthening its position in advanced manufacturing and semiconductor technology. North Wales remains heavily influenced by aerospace and advanced manufacturing, and West Wales is becoming increasingly important as investment in renewable energy and heavy industry gathers pace.

For employers, those regional differences are becoming increasingly important. A recruitment strategy that works in Cardiff may look very different in Port Talbot, Wrexham or Milford Haven, particularly in sectors where experienced candidates remain in short supply.

Salaries are still moving in one direction

If recruitment were becoming easier, wages would usually begin to stabilise. Instead, Wales has seen the opposite.

According to industry research prepared for Rhino Recruitment, Wales recorded the highest advertised salary growth of any UK nation or region during 2026, with advertised pay increasing by 9.2% year-on-year. The rise reflects continued competition for experienced professionals rather than a surge in vacancies, as employers look to secure the skills they need in an increasingly selective market.

The strongest increases continue to be seen in sectors where skills shortages have become entrenched. Engineers, commercial professionals and experienced construction specialists remain difficult to replace, leaving many employers with little choice but to offer higher salaries and improved packages to remain competitive.

The pressure on wages also reflects the scale of investment planned across Wales. With large infrastructure, manufacturing and renewable energy projects competing for many of the same people, attracting experienced candidates is becoming just as important as finding them.

Redundancies don't tell the whole story

Recent redundancy announcements have inevitably raised questions about the direction of the Welsh labour market. Manufacturing and heavy industry have faced well-publicised challenges, while some employers have reduced headcount in response to higher operating costs and weaker demand.

Those headlines can create the impression that recruitment opportunities are disappearing across the country, but the wider data suggests a more balanced picture. While some businesses are reducing recruitment, others continue to invest and expand, particularly in industries linked to infrastructure, advanced manufacturing, defence and renewable energy.

The result is a labour market that's becoming increasingly uneven. Demand is softening in some occupations while remaining exceptionally strong in others, making regional knowledge and sector expertise more valuable than ever for employers planning future recruitment.

The figures also come with a note of caution

Labour market statistics are designed to show long-term trends rather than short-term movements, and the Welsh Government advises that the latest Labour Force Survey estimates should be interpreted carefully because of increased uncertainty surrounding the data. Smaller sample sizes mean short-term changes may not always reflect genuine shifts in the labour market.

That is why looking at a single headline rarely provides the full picture. Employment figures, payroll data, salary trends, employer surveys and investment plans all help explain where recruitment is heading, and together they suggest a market that continues to evolve rather than one entering a sustained decline.

What it means for employers and job seekers

For employers, the challenge is becoming less about recruiting large numbers of people and more about securing the right people before competitors do. Businesses recruiting specialist professionals may need to move faster, review salary expectations and think more strategically about workforce planning as competition for experienced candidates continues.

For job seekers with in-demand technical skills, the outlook remains positive. While overall recruitment has become more measured, demand for experienced engineers, commercial professionals, project managers and skilled tradespeople continues to be driven by long-term investment across Wales.

The latest figures suggest recruitment has entered a different phase rather than coming to a stop. Employers may be advertising fewer vacancies than they were during the post-pandemic hiring boom, but the need for specialist skills remains firmly in place. As investment across Wales gathers pace over the coming years, that demand is likely to shape the labour market long after today's headline figures have changed.