John Philpott, Chief Economist, Chartered Institute of Personnel and Development Even if we avoid the scale of jobs fallout suffered in previous downturns, the era of the candidate’s recruitment market is already over John Philpott, Chief Economist, Chartered Institut

The latest quarterly Labour Market Outlook (LMO) survey of 1, 221 UK employers shows employment prospects weaker than at any time since the survey began in 2004, with recruitment activity falling and redundancies set to increase.

This finding is particularly worrying given that the third quarter is normally the most buoyant for recruitment, as it covers the September wave of recruitment activity.

Although the survey finds that more than 1 in 4 (29%) employers expect to increase staff levels in the third quarter this represents a sharp drop from 37% in the second quarter and is by far the lowest third quarter LMO figure recorded since 2004. The comparable third quarter LMO survey figures are: 2004 (58%); 2005 (48%); 2006 (43%); and 2007 (38%).

The number of employers planning redundancies increased from 22% to 27% between the second and third quarter LMO surveys.

Pay expectations remain modest despite higher price inflation. Employers carrying out staff pay reviews in the third quarter expect average increases of 3.7% (3.9% when bonus payments are included).

John Philpott, Chief Economist at the Chartered Institute of Personnel and Development (CIPD) comments:

“The jobs market has been one of the few bright spots in the UK economy, but cracks are appearing in the face of an increasingly uncertain economic outlook. Even if we avoid the scale of jobs fallout suffered in previous downturns, the era of the candidate’s recruitment market is already over, with people in work becoming increasingly anxious that their P45 might soon be on its way.”

Philpott continues:

“With pay pressure still subdued, mounting job insecurity is being compounded by a significant squeeze on workers’ real incomes. But the absence of any sign of an emerging wage-price spiral at least offers greater hope that the Bank of England might soon be able to cut interest rates to head off the threat of recession.”

Andrew Smith, Chief Economist at KPMG, said:

“Companies are now reacting to deteriorating market conditions. With sales slowing and input costs rising - but scope to raise prices limited by weakening demand - finances are under pressure.

“It looks as if employment costs, the main area over which businesses retain control, are taking the strain with employers seeking both to keep a lid on pay settlements and, in increasing numbers, planning for redundancies. The labour market is suddenly looking a lot less resilient.”