Labour market on its back says report

The labour market was "flat on its back" despite predictions that the "epidemic" of redundancies may have eased, according to a new report today.

The Chartered Institute of Personnel and Development (CIPD) said the relative improvement in job prospects for the rest of the year was taking place against a backdrop of a much reduced pressure of demand for workers.

Employers' hiring intentions were well below pre-recession levels, and there was no sign that the labour market was anywhere close to returning to "proper health", said the report.

A survey of 700 employers showed a fall in the number planning to make staff redundant compared with earlier in the year, although the jobs outlook was forecast to deteriorate "markedly" in manufacturing and production sectors.

Pay rises remained "modest" and working hours were still being cut, confirming the weak demand for labour, the study found.

Expectations about future pay rises have fallen to a record low of 1.5 per cent, down from 1.7 per cent in the summer, while working hours looked set to continue being reduced for the next year, it was predicted.

One in six organisations has cut hours for some staff in the past year, with a similar number planning to ask staff to work shorter hours in the next 12 months.

Gerwyn Davies of the CIPD said: "The UK jobs market remains flat on its back. Things aren't anywhere near as bad as they were earlier in the year when redundancies spread through the economy like a virus, and with things looking up in one or two sectors there is mounting hope that the ongoing gradual decline in job prospects might run its course next year before unemployment reaches three million.

"The patient remains seriously weak, won't recover for several years even if a return to robust economic growth provides the necessary tonic and could easily relapse if the recovery is as fragile and anaemic as many economists fear."

Andrew Smith, chief economist at KPMG, which helped with the study, added: "This recession has come through not only in job losses but also in greater labour market flexibility - reduced working hours, pay freezes and outright wage cuts.

"The decline in average pay settlements, expected to fall to a record low of 1.5 per cent, suggests that underlying inflation pressures continue to weaken while the risk of deflation is rising - justifying the Monetary Policy Committee's decision to extend its quantitative easing programme by £25 billion."

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