Employers are becoming increasingly worried about the future, according to this quarter's figures from the Recruitment Confidence Index (RCI).
The index has continued to fall and now stands at 113 compared with 119 three months ago, suggesting a drop in recruitment activity.
The RCI is a quarterly survey of public and private sector employers that measures expected changes in recruitment activity and business conditions over the following six months.
Run by the Cranfield School of Management, the Daily Telegraph and Personnel Today, the latest figures - which also look at recruitment methods, skills shortages, staff turnover and pay rates - show that employers are concerned about business conditions and demand for their products and services.
Business confidence is also falling, and has plummeted in the service sector over the past nine months. A net figure of just 15 per cent of employers say they are optimistic, compared with more than 70 per cent last summer.
However, the real problems could lie with retailers. A closer look at the results show that while communications, health and hotels are still reasonably buoyant about the future, confidence among retailers has sunk to a net figure of minus nine per cent.
Commenting on the findings, Shaun Tyson, professor of human resources at Cranfield School of Management, said: "There is a definite feeling of pessimism about the economy, especially in the service sector, which had a reasonably buoyant 2002.
"We need to put the figures in perspective, though - the research was carried out just before war broke out with Iraq, and that was an issue for some employers," he said.
"Recruitment confidence is declining relative to a very high peak 18 months ago immediately before the September 11 attacks on the World Trade Centre. This was a time when demand was far too high - especially in the South East - and employers could not recruit people for love nor money.
"These results are not suggesting that employers are about to shed thousands of staff and we are not facing the prospect of mass unemployment," he added. "But nor are many employers about to expand."
The spring 2003 fig