Redundancies – The Labour Market Outlook Survey

A press release issued by the Chartered Institute of Personnel and Development (CIPD) on 10 August 2009 notes that “the pace of deterioration in UK job prospects is starting to slow this summer as private sector demand for staff begins to stabilise following a surge of redundancies earlier in the year”.

According to the CIPD, not only are fewer employers expecting to make staff redundant but the scale of planned redundancies has also reduced. These findings were contained in the latest quarterly CIPD/KPMG Labour Market Outlook (LMO) survey which involved more than 900 employers and covered all sectors of the economy.

However, the CIPD notes that signs of improved employer optimism in the private sector are offset by mounting pessimism in the public sector. Moreover, the CIPD accompanies the LMO survey results with a warning that a weak economic recovery could trigger a renewed burst of redundancies in the private sector if corporate profits continue to be squeezed by fast rising unit labour costs.

Amongst employers making redundancies, workforce reductions of four per cent are expected in the three months following the survey, down from 6.5 per cent in the spring. The research also found that the pay outlook has worsened, with only 15 per cent of respondents planning to conduct a pay review this quarter, less than half the percentage of last quarter (32 per cent). Average pay increase expectations have dropped below the rate of inflation to 1.7 per cent.

Dr John Philpott, Chief Economist at the CIPD, said:

“When it comes to the immediate jobs outlook, the best that can be said is that things are getting worse more slowly. Employment will keep falling and unemployment is still on course to top three million in 2010. And it is far too soon to rule out another avalanche of private sector redundancies later in the year. While pay restraint or cuts in hours of work has helped save many jobs that might otherwise have been lost during the recession, holding onto staff when order books are far from healthy pushes up unit labour costs and eats into company profits. This can’t be sustained indefinitely – a weak economic recovery, let alone a double dip recession, might well cause many employers to reassess current staffing levels before too long.”

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