In its mid-year update on the state of the UK jobs market the Chartered Institute of Personnel and Development (CIPD) finds the outlook for employment and pay to be in line with its start of year forecast but warns that a rise in interest rates would put a brake on recruitment and risks leading to an avalanche of redundancies.
Commenting ahead of the Bank of Englandís latest interest rate decision the CIPDís Chief Economist John Philpott said:
ìLast December the CIPD forecast that 2008 would be the UKís worst year for jobs in a decade and that pay pressure would remain subdued despite the impact of rising fuel and food prices. We predicted some growth in employment - though only a third of that enjoyed in 2006 and 2007 and not enough to present a rise in unemployment ñ resulting from a squeeze on recruitment and a limited increase in redundancies confined to certain sectors.
ìAlthough this forecast was initially considered pessimistic it is in line with labour market outcomes and if anything now looks relatively optimistic in comparison with the prevailing mood of economic doom and gloom, widespread reports of a significant slowdown in recruitment and a growing number of large scale redundancies.
ìHowever, our initial forecast was based on the assumption that UK interest rates would fall in the second half of 2008. This now seems unlikely, increasing the risk that the outlook for employment and unemployment will be worse than originally expected. Moreover, the CIPD now also expects limited if any growth in employment in 2009 with the number of people unemployed and in receipt of Jobseekersí Allowance rising back above 1 million.
ìThis more subdued forecast assumes that Bank interest rate remains unchanged throughout the remainder of 2008. A rate cut or cuts would increase our optimism but a rate hike would be a cause of major concern. Our indications are that an increasing number of employers are in ëwait and seeí mode and have made contingency plans for redundancies if the economic situation were to deteriorate in the coming months.
ìMany employers have their finger on the redundancy trigger. They are not yet ready to start firing but a rise in interest rates would probably be enough to cause a substantial jobs cull come the autumn. And once this starts the economy could witness a sudden ëavalancheí of redundancies.î
CIPD jobs market update ñ Rise in Bank interest rate would trigger autumn jobs cull
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