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CIPD suggests signs of upturn in labour market

The immediate jobs outlook has turned positive for the first time in more than a year, driven largely by a decrease in redundancy intentions, according to a CIPD/YouGov survey of more than 1,000 employers.

The CIPD's quarterly Labour Market Outlook's net employment balance, which measures the difference between the proportion of employers that intend to increase total staffing levels and those that intend to decrease total staffing levels in the first quarter of 2012, has risen to +6 from -8 since the Winter 2011/12 quarter. This is the report's first positive figure for more than a year.

But the CIPD warned optimism should be tempered by employers' caution about the medium term, which taken together with recent weak economic data, suggests a high risk that many employers may find it necessary to reassess staffing levels before the year is out. The Labour Market Outlook Spring 2012 report shows that improving overall employment prospects are being driven more by a fall in redundancy intentions in the public and private sectors than a rise in recruitment intentions. The private sector is driving much of the upturn, with the net employment balance for the private sector rising to +25 compared with +10 three months ago. Meanwhile, the net employment balance for the public sector (-32) is at its least negative since the winter 2009/10 report - and compares to -49 last quarter.

Private sector services companies are driving much of the predicted upturn in employment prospects, with the net employment balance improving to +25 in the second quarter of 2012 compared with +11 three months ago. The net employment balance has improved for the manufacturing and production sector from +1 to +19 in the previous three months.

Almost two thirds (65%) of employers plan to hire employees in the second quarter of 2012. Hiring intentions are strongest in the finance, insurance and real estate sector (74%) and the voluntary and not-for-profit sectors (77%).

The proportion of employers planning to make redundancies in the three months to June 2012 has decreased to 32% from 37% in the previous 3 months. The number of private sector firms planning redundancies has fallen from 31% to 25% during the past three months. The number of public sector employers planning redundancies has fallen to 45% from 49% during the same period.

The continuing pressure that employers face to cut costs is evidenced by an increase in the proportion of organisations that are intending to offshore jobs to other parts of the world in the 12 months to March 2013, from 6% to 8%. Eight out of 10 (79%) employers cite cost cutting as the main reason for offshoring jobs.

Of those who intend to offshore jobs, 41% reported these would be in IT support and 29% in productions / operations. Finance and accounts (23%), call centres (21%) and HR (21%) are other popular functions employers plan to offshore.

But the survey also highlights the potential risks of offshoring, with more than a quarter (26%) of employers that have offshored jobs overseas now looking to relocate operations back to the UK.

Gerwyn Davies, public policy adviser at the CIPD, said: "The jobs market is desperately seeking good news, so this latest set of positive figures is very welcome. However, any short-term jobs recovery may not be sustained because of the zigzagging economic backdrop. News of a double-dip recession may cause some employers to reassess current staffing levels, especially while labour costs are rising and productivity is falling. The current economic situation facing recruiters looks unusually difficult to read, which may lead to swings in confidence for the rest of the year. Overall, this may suggest greater volatility in the labour market during 2012 compared to the slow, gradual rise in unemployment recorded during the past year." "The continuing pressure on employers to cut costs is highlighted by the increase in employer intentions to offshore UK jobs to other parts of the world. However, the survey also highlights the dangers facing employers that focus too narrowly on costs at the expense of quality when offshoring, with around a quarter of employers now planning to relocate jobs back to the UK. Employers need to weigh up the wider impacts when considering offshoring decisions, such as the potential adverse impact on customer service or employer brand."