Recruitment stalls as employers remain gloomy about economy

Employers are extremely gloomy about the economy with the creation of new jobs at a virtual standstill, the latest quarterly figures by CIPD/KPMG reveal.

A survey of 721 employers found the balance between the proportion of employers expecting to increase staff levels in the next three months and those expecting to cut staff had plunged from 41 points in autumn 2007 to just 2 points in autumn 2008 (on a scale where 0 means no change).

More than four in five employers expected the economic condition of the UK to deteriorate as winter approaches, the Labour Market Outlook report found.

Elsewhere, staff pay, excluding bonuses, was predicted to rise on average by 3.5% at the time of employers’ next pay reviews – slightly lower than the expectation of a 3.7% increase recorded in the summer.

However, the expected average increase including bonuses rose from 3.9% to 4%.

CIPD chief economist John Philpott said: “We are now at the start of a period of contraction, with jobs being lost, new jobs hard to come by and, as this week’s official statistics are set to confirm, unemployment on an ever sharper upward rise. With pay increases at best modest for those still in work the harsh chill of recession will make this the toughest winter for UK households for almost two decades.”

Andrew Smith, KPMG chief economist added: “While the pressures on business to control spending – both on staff and in other areas – are real and intensifying, there has to be a balance between cutting costs now and the risk of lasting damage to the business through inadequate investment for the longer term.”

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