CIPD predicts further rise in employment despite stalling economy

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Employment will continue to grow during the first quarter of 2013, which will mark the fourth consecutive quarter of growth.

This is according to the latest Labour Market Outlook report from the Chartered Institute of Personnel and Development (CIPD), which is based on employment balance – measuring the difference between the proportion of employers that intend to increase staffing levels and those that intend to decrease them.

The report found that the balance remained positive for the first quarter of 2013 at +5, which was a slight decrease on the +7 figure for the final quarter of 2012.

The report highlighted some of the reasons for what the CIPD called a “jobs enigma” of increasing employment despite a backdrop of stalling economic growth.

The CIPD said one reason is the number of people who are employed but not in full-time or permanent roles. One-third (33%) of employers that responded to the survey said they had reduced some employees’ hours in the past five years. The CIPD also found that 30% of part-time workers would like to increase the hours they work, but many of these employees felt that their employers were unable to offer longer hours.

The CIPD also suggested that the increasing use of temporary contracts will continue to inflate employment figures, with respondents saying that 29% of new recruits will be employed on this basis. The survey also found that almost half (44%) of employees on temporary contracts would prefer a permanent contract.

The CIPD said that lower wage settlements are helping to create and preserve jobs, as well as the fact that many employers have retained staff levels above their existing level of output, with 66% of employers giving skills retention as the main reason for doing so. However, 66% of employers said they will be forced to make job cuts if output does not increase in 2013.

Gerwyn Davies, CIPD labour market adviser, said: “Growth in employment looks set to continue in the short term, despite faltering economic growth. While muted pay growth is playing a part, we also see continued evidence that employers are reluctant to lay off skilled workers. This is often described in terms of ‘labour hoarding’, which implies an irrational response by employers.

“The truth is that employers have learnt the lessons of the past, where overly quick steps to cut staff led to a loss of talent and damaged the capacity of organisations to recover. The challenge for today’s employers is to find innovative ways to deploy the skills available to them as they look for ways to grow in current market conditions.

“Some employers are clearly using flexible working and reduced hours to adapt to trading conditions. For many workers, this will mean they are offered less security, fewer hours and less money than they want. For others, however, this provides greater opportunities to secure flexible working. This is especially the case for older workers, who have fared best since the recession but still have the greatest difficulty re-entering the jobs market. It will be interesting to see whether a return to growth reveals a labour market permanently adapted to accommodate employees who choose to work part-time hours or whether they will face renewed difficulty finding suitable part-time roles once employers face stronger demand pressures. In the meantime, managers face an additional challenge in continuing to retain and motivate employees to whom they are not able to offer more job security and full-time hours and pay.”

The survey further highlighted the divide between the private and public sectors, with employers in the private sector optimistic on hiring intentions, with a net balance of +16 compared with +18 three months ago, whereas the public-sector balance has dropped sharply to -29 from -17 three months ago.

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