Two surveys out today suggest that the jobs market is fragile. A Bank of Scotland survey reports that a growing number of workers in Scotland found jobs in July, but the economic crisis meant that the improvement would be hard to maintain.
The quarterly forecast by the Chartered Institute of Personnel and Development (CIPD) and KPMG warns of a drop in business confidence leading to a loss of jobs later in the year.
The Bank of Scotland “Labour Barometer” is based on a monthly survey of around 100 recruitment and employment consultants. It’s a snapshot of how these organisations view the current market conditions, looking at such things as demand for staff, employment and availability for work and pay. Any figure above 50 represents expansion in the market; one below 50 means contraction. In July, the barometer measured 55, fractionally down from June, but the figure was higher than the UK average.
“The Scottish labour market showed a further improvement in July," said the bank's chief economist, Donald MacRae, "with both permanent and temporary staff appointments increasing strongly. There was a rise in the number of people placed into permanent work, bringing the current period of growth to ten months. However, it will be difficult to maintain improvement, given the concerns over sovereign debt in the eurozone and slowing growth in the USA.”
That view is shared by the CIPD, which surveys 1,000 employers across the UK. Its report suggests that the number of employers hiring staff has dropped, with the jobless figures set to increase in the coming months. If this prediction is fulfilled and the past year’s drop in unemployment is reversed, then it will be a serious blow to the government’s economic policies.
“On average, growth in hiring intentions has been reported throughout the past year," says the CIPD report, "but a more sombre outlook is now being driven by a fall in confidence among private sector employers, particularly in manufacturing.” The report adds that the number of firms taking on new staff has fallen by a third over the last three months.
According to Gerwyn Davies, public policy adviser at the CIPD, “increasing uncertainty about growth prospects in both the UK and global economies is now affecting hiring intentions, particularly in those industries such as manufacturing that stand to lose most in the event of a global slowdown. Together with the public sector redundancies, which will affect one in 20 frontline workers according to our survey, the recent story of an employment revival may become one of an employment relapse."
Andrew Smith, chief economist at KPMG, adds that “the economic storm clouds are gathering. Hopes of a general rebalancing in the economy, away from consumption towards exports and investment, are being dealt a blow by sinking manufacturing confidence – undermining hopes that cuts in public sector employment will be offset by the private sector.”
The reports will make depressing treading for the government, especially following last week’s decision by the Bank of England to cut its forecast for economic growth this year to 1.4 per cent. At the time, the bank's governor, Mervyn King, warned that headwinds for Britain's economy were growing by the day.
This means that more attention than usual will be paid to the latest unemployment figures, due out on Wednesday. There are already nearly 2.5 million adults out of work, nearly a million of them young people. Some economists expect the number of claimants to rise by 20,000 in the latest figures, though the unemployment rate of 7.7 per cent is expected to remain stable for the three months to June.
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