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NEWS: Net employment outlook at record low

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The jobs market will continue to shrink in the next three months as the number of employers planning to make redundancies continues to exceed the number of employers planning to hire according to the CIPD/KPMG Labour Market Outlook.

The survey of more than 500 employers found that net employment intentions* has fallen to another record low of -19, down 10 points compared with the winter quarter.

In a sign that the recession is hitting all sectors of the economy, the net employment intentions figure is now negative for all three main sectors of the economy for the first time. Although the private sector is most pessimistic, with a net employment intention figure of -30; the public sector is now also recording a net figure of -3 due to a rise in the number of redundancies in local government in particular. The figure for the voluntary sector is -12.

John Philpott, Chief Economist at the Chartered Institute of Personnel and Development, said: “We’ve always said that the worst of the recession for the jobs market would be felt in the first part of 2009, and unfortunately we’re now finding ample evidence to support our predictions. It is unsurprising that the private sector is being hardest hit. But here is evidence for the first time that the public sector is beginning to feel the pain. Following last month’s budget, this is certain to become a regular phenomenon for taxpayer funded jobs.”

Philpott added that he expected private sector net employment intentions to start to improve in the “near future” but added that the current figures for the public sector would look like “a walk in the park” as the need to balance books gathers strength.

Pay awards in all three sectors are also reflecting the impact of the recession. Over a quarter (27%) of firms said they had no intention of carrying out a pay review this year, up 14 points on the winter quarter. Once again, the private sector is worst hit, with a third of private sector organisations planning to hold pay steady for the next year.

Among those offering pay rises, restraint is the order of the day. The mean basic pay increase for those organisations that intend to carry out pay reviews has fallen from 2.6% to 2%. Over three-quarters of employers (78%) say their next pay review will deliver a smaller increase than last year’s.

Andrew Smith, Chief Economist at KPMG, said: “While low wage increases and even absolute cuts may help to reduce business costs and somewhat ameliorate job losses for now, there is also a potential downside as, collectively, lower incomes also reduce aggregate demand. Whichever way you look at it, the labour market outlook remains bleak - even though some data is showing signs that the freefall in economic activity may be coming to an end.”

The report also shows that very few employers will change their pension arrangements this quarter (5%). Yet, a third will cut bonuses while a further one in ten will cut them altogether. The figures understate the degree of this change given that bonuses do not feature in a quarter of organisations, which are mainly drawn from the public sector.

* The net employment intentions figure measures the difference between the proportion of employers who expect recruitment and/or make redundancies to increase total staff levels and those who expect this to decrease total staff levels.

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