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Recession bites harder

Recession bites harder, as CIPD/KPMG labour market report finds net employment outlook at record low, and all sectors in firing line

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, a survey of more than 500 employers. The key indicator in the quarterly report covers net employment intentions*, and this quarter the figure has fallen to another record low of -19, down ten 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, says:

Weve always said that the worst of the recession for the jobs market would be felt in the first part of 2009, and unfortunately were 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 months budget, this is certain to become a regular phenomenon for taxpayer funded jobs. Indeed, while I expect private sector net employment intentions to start to improve in the near future, the current figures for the public sector will look like a walk in the park as the drive to balance the books gets underway in earnest.
Pay awards in all three sectors are also reflecting the impact of the recession. There has been a surge in the number of organisations not planning a wage review in the coming year. Over a quarter (27%) have 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.

Even if your employer is planning a pay increase, 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 years.

Andrew Smith, Chief Economist at KPMG, says:

"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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