According to the REC, recruiters are already finding it hard to supply jobs in certain areas such as IT and engineering to fill current demand.
It believes government infrastructure will need to be mirrored by a systematic focus on skills to prevent these skills shortages becoming a barrier to further growth.
REC has also called for Osborne to protect the UK's flexible labour market, which it believes has been critical to maintaining employment levels and avoiding the high rates of joblessness seen in other countries.
It has highlighted the need for improved access to finance SMEs in order to sustain job creation and wants Osborne to implement the Heseltine Review's recommendations to improve SMEs' access to funding through Local Enterprise Partnerships, peer to peer lending and the Funding for Lending scheme.
REC chief executive Kevin Green said: "The chancellor has got to do something about jobs and growth or the gravity defying rise in employment we've seen over the past year won't be sustainable.
"The Budget is likely to focus on investment in infrastructure, however the chancellor will find his ambitions thwarted by a lack of skilled workers to deliver big new construction projects if there isn't an urgent focus on boosting candidate availability in key growth sectors like engineering and IT.
"An investment in those who currently don't have the right skills for available jobs, be they young or old, needs urgent action not just lip service."
Green added: "Most recruiters are SMEs and the vast majority of new jobs will be created by small businesses – they are the backbone of our economy.
"It's vital the Government supports entrepreneurs, the self-employed and small business owners to get access to funding, a fair share of public sector contracts and the most benefit of any reduction in corporation tax."
