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Private sector job creation not enough to offset public sector cuts

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Overall employment levels are heading for a fall in 2011 as redundancies look set to rise sharply in the first quarter of the year, according to a report out today.

 

The Chartered Institute of Personnel and Development (CIPD) and KPMG’s quarterly Labour Market Outlook survey of 750 employers finds that redundancy intentions have risen to their highest level since the survey began. They are highest in the public sector where more than half (52%) of employers intend to make redundancies in the first three months of 2011. More than three-quarters (77%) of local government employers plan to make cuts to their workforces.

One in three (33%) of employers say they will be looking to employ fewer people in 2011 as a result of the Comprehensive Spending Review.

The Labour Market Outlook net employment index, 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 2011, has fallen to -3 from +11 in the past three months. 

There is some good news in the private sector with manufacturing and services both generating jobs growth (+20 each). However, two thirds of public sector organisations (-66) will be looking to reduce the size of their workforces in the first quarter of 2011. 

"Encouragingly, the private sector continues to generate new jobs, but we are some way off the jobs boom that we are all hoping for," said Gerwyn Davies, public policy adviser at the CIPD.

"While private sector jobs generation is encouraging, it’s more important than ever that the Government continues its growth efforts in the private sector so as to offset the jobs gloom in the public sector."

The report’s 12-month index, which gives a longer-term perspective on recruitment and redundancy intentions, has also fallen to -9 from +1.

"These figures show that there continues to be a marked divide in the UK jobs market, with the public sector still fearing the worst while the private sector shows signs of better health," added Malcolm Edge, head of markets at KPMG.

"Manufacturing and services are engines of the national UK economy so it is encouraging to see positive growth there and, with this resurgence in the manufacturing sector, one hopes that the trend will continue. However, the private sector recovery is not yet fully established and therefore remains susceptible to shocks." 

Downward pressure is also expected on wages. Basic pay increase expectations have fallen to 1.3% from 1.5% during the past three months. Average pay settlements in the public sector are expected to fall to -0.33% which compares with 2.3% in the private sector.