Bonuses have virtually been wiped out in the private sector this year as employers cut costs to retain key staff, the latest labour market figures out last week showed.
The Office for National Statistics data revealed the earnings annual growth rate, including bonuses, was 0.1% in the three months to February 2009, down 1.6 percentage points from the previous quarter. Private sector pay growth, including bonuses, has fallen to -2.8%, compared to 3.5% in the public sector.
Unemployment had also increased by 177,000 people over the quarter, taking the new jobless total to 2.1 million – the highest in 12 years.
John Philpott, chief economist at the Chartered Institute of Personnel and Development (CIPD), warned the private sector pay slump would continue as unemployment rose to an “inevitable” 10% of the working population by 2010.
“Bonuses have virtually died a death in the private sector this year as employers cut costs and staff try to hold onto their jobs,” he said. “Add the arrival of price deflation into the mix and the chances are that growth in regular pay (excluding bonuses) will also show signs of a further marked slump in the coming months.”
Public/private jobs divide
The employment gap between the two sectors also continued, with employment up by 30,000 in the public sector but down by 105,000 in the private sector year-on-year.
Last month, the CIPD called on the government to clamp down on public sector pay rises. Unions are still negotiating this year’s pay deal for council staff, after rejecting the initial 0.5% offer on the grounds it was far below the 2% other public sector workers will receive.
A CBI forecast out last week warned unemployment is expected to continue to worsen over the next 12 months, breaking 10% in the first quarter of 2010 and peaking at 3.25 million unemployed (10.3%) in the second quarter.
City finance jobs still under threat
Thousands more City finance jobs are expected to go this year despite signs of economic recovery, according to a research organisation.
The independent consultancy, the Centre for Economics and Business Research (CEBR), has predicted the loss of another 29,000 City finance jobs. This figure is less than the 34,000 jobs it already predicted in October.
Richard Snook, a senior economist at CEBR, said: “We are beginning to see light at the end of the tunnel for the City.”
However, he added there will be further serious job losses as a fall in mergers and acquisitions is expected.
Overly tough restrictions on the City, prompted by the banking crisis, could damage the long-term growth of the finance sector, Snook added.