The figures confirm forecasts made by the Chartered Institute of Personnel and Development (CIPD) at the start of the year. John Philpott – chief economist at the CIPD – warns that the economy is increasingly likely to experience “an avalanche of job losses” in the coming months.
“With horribly bitter timing this extremely weak set of job figures – which we expected but nevertheless hoped not to see – has arrived in one of the gloomiest weeks of economic news for a long-time,” commented Philpott. “A significant drop in job vacancies and a sudden large jump in the vacancy rate underlies a fall in the number of people in work and a surge in joblessness. There are not only more people unemployed and looking for jobs but also more individuals who are economically inactive and outside of the workforce.”
Long periods of inactivity
According to Philpott, most worrying of all is the fact that more of the jobless are suffering long-periods without work – a trend that looks set to worsen with the number of vacancies falling so sharply.
“Today’s bad jobs figures will not be the last,” warned Philpott. “The official snapshot shows that the jobs situation worsened in the summer months. CIPD surveys of employers’ recruitment and redundancy intentions show that the demand for staff has weakened further into the autumn and will continue to do so as the economic downturn bites.”
Monthly inflows to claimant unemployment – an important leading indicator of the state of the economy and jobs market – are rising sharply. With business confidence diminishing almost by the day, it’s becoming clear that more and more employers are readying themselves for further job cuts. This greatly increases the chances of what the CIPD warned earlier in the year might be an autumn and winter “avalanche of redundancies” which would propel the unemployment rate back over 2 million in 2009 and leave more than one million in the queue for Jobseekers Allowance.
Construction, retail and leisure hit hard
“Despite all the doom and gloom in the City, today’s figures indicate that the jobs crunch in the summer months hit hardest in construction and shops, hotels and restaurants – parts of the private sector directly affected by the housing market slowdown and reduced consumer spending,” suggested Philpott. “By contrast, the public sector registered a surprise increase in jobs, although the employment outlook is at best flat for the public sector.”
Philpott added: “In a break with recent trends, middle-aged people and those up to state pension age appear to have borne the brunt of the fall in employment. This may signal that despite the introduction of age discrimination legislation, older people might still be those more likely to accept voluntary redundancy or be the unwilling victims of compulsory job cuts.”
For Philpott, the only bright spot in the latest labour market figures is that growth in average earnings remains very subdued against a background of a serious squeeze on household incomes as a result of the recent big rise in the cost of living.
Inflation-matching pay rises
“Given the current state of the jobs market,” explained Philpott, “employees in general simply aren’t capable of securing inflation-matching pay rises. The spectre of a ‘pay-price spiral’ is therefore clearly exaggerated, which offers greater hope that the Bank of England will make an early cut in interest rates to head off the risk of a prolonged recession.”
The Chartered Institute of Personnel and Development (CIPD) has over 130,000 members and is the leading professional institute for those involved in the management and development of people.
