'Avalanche of redundancies' in prospect, with construction sector one of the hardest hit

The latest set of official labour market figures published by the Office for National Statistics (ONS) shows the worst deterioration in the UK’s underlying job situation for at least a decade.

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.

Dr Philpott commented: “With horribly bitter timing this extremely weak set of job figures – which we expected but hoped not to see – has arrived in one of the gloomiest periods of economic news for a long time.”

The CIPD warned that a significant drop in job vacancies underlies a fall in the number of people in work and surge in joblessness. “There are not only more people unemployed and looking for jobs but also more economically inactive and outside the workforce,” said Dr Philpott. “Most worrying of all, 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.”

The CIPD thinks that more gloomy news is to come. “Today’s bad jobs figures will not be the last,” said Dr 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. And with business confidence diminishing almost by the day it is becoming clear that more and more employers are readying themselves for further job cuts.

“This greatly increases the chances of what earlier in the year we warned might be an autumn and winter ‘avalanche’ of redundancies, which would propel the unemployment rate back over two million in 2009 and leave more than one million in the queue for Jobseekers Allowance,” said Dr Philpott.

“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,” said Dr Philpott. The public sector, by contrast, registered a surprise increase in jobs, although the jobs outlook is at best flat for the public sector too.

“The only bright spot in today’s 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,” he said.

“Given the current state of the jobs market, 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.”