UK jobs market recovery 'to stall'

The fall in the UK jobless rate will raise recovery hopes

Recovery in the jobs market will "stall" this year as demand for workers in the public sector falls, new research has warned.

According to the Chartered Institute of Personnel and Development (CIPD), a third of employers expect to cut jobs in the next three months.

The public sector employers in particular are planning cuts, with 36% of them looking to lose staff.

The size of the cuts being considered has also increased, the CIPD said.

Across all sectors employers are expecting to make an average of 5.5% of their workforces redundant, the survey of 600 companies suggests, up from the 3.6% average cut being considered three months ago.

Despite the threat of cuts, the CIPD's net employment index, which measures the number of companies planning to hire against the number planning to lose staff, is still in positive territory at +two, down from +five three months ago.

But the difference between the public and private sectors is stark. For the private sector alone, the index shows strong hiring intentions at +19 while in the public sector, the index gives a reading of -35.

Jobless rise predicted

"The employment situation looks like a case of the good, the bad and the ugly," said Gerwyn Davies, CIPD public policy adviser and report author.

"While the number of employers planning to make redundancies is similar to that in the spring, this trend masks the true extent of forthcoming job losses in the third quarter of the year.

"This is being driven chiefly by public sector organisations, where redundancies will affect almost 8% of the workforce on average."

He added that a rise in unemployment over the medium term was now on the cards.

"The CIPD believes that a rise in unemployment in the next two years remains a distinct possibility as the private sector recovery is offset by the 600,000 public sector job losses the government expects over the next five years."

Alan Downey, head of public sector at KPMG, which helped carry out the research, said it was not clear that the private sector would be able to fill the gap left by a shrinking public sector.

"The big question is whether the private sector can create new jobs in sufficient numbers and quickly enough," he said.

The latest official figures showed that unemployment fell in the three months to May this year, to a total of 2.47 million.

In October the scale of cuts to government departmental budgets will become clear when the government announces the results of its spending review.

Cuts of 25% are anticipated for most departments.

According to the CIPD's survey, job losses are most likely in local government.