Private Sector Jobs Recovery Overwhelmed by Public Sector Losses, Survey Finds

   Published 2011-05-18

London — May 18

The impact on the overall labor market of a slight rise in private sector recruitment is still being cancelled out by large-scale public sector job losses, according to this quarter’s Labour Market Outlook from the Chartered Institute of Personnel and Development (CIPD) and KPMG.  The survey also forecasts that pay inflation may pick up in the next twelve months, with average pay award expectations across all sectors rising to 1.7 percent from the 1.3 percent recorded last quarter.  

The survey of employers suggests that overall employment levels may show a slight improvement in the second quarter of 2011.

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 risen to +3 from -3 in the past three months.  

The private sector will continue to generate jobs growth, with manufacturing (+41) among the most buoyant parts of the UK economy. This is in sharp contrast to the public sector (-52). The report’s twelve-month index, which gives a longer-term perspective on recruitment and redundancy intentions, has risen to -3 from -9 since the previous report. Despite this slight improvement, the number of organizations planning to make redundancies has risen to its highest level (39 percent) since the survey began in 2004, with more than half of public sector organizations (56 percent) planning redundancies in the second quarter of 2011.  More than a quarter of private sector firms (29 percent) are also making redundancies.  

“The jobs market appears to be taking baby steps on the long path to pre-recession levels,” said Gerwyn Davies, public policy adviser at the CIPD. “There are many sectors, such as manufacturing, that are taking large strides forward.  But consumer-facing industries are simply edging forwards due to a fear of another consumer slowdown. Together with the onset of public sector cutbacks, the risk of an employment slowdown appears finely balanced.” 

On the pay front, more firms are now forecasting that they will be increasing employee pay over the coming 12 months (52 percent compared to 47 percent last quarter) and the average size of the predicted pay award has increased from 2.3 percent last quarter to 2.5 percent, but still below the future rate of inflation. The report shows that the main cause of the expected increase in salaries is organizations’ ability to pay (31 percent). This indicates that firms have more money to spend on pay awards. While inflation is currently high, it has not resulted yet in a sharp rise in the level of forecast pay rises – 18 percent of companies report an upward pressure on salaries and 6 percent cite recruitment and retention issues will result in higher pay, reflecting the subdued labor market.

Pay forecasts in the public and voluntary sector are more subdued than the private sector. Public sector employers predict pay to increase by just 0.3 percent over the coming year, while the voluntary sector reckon it will increase by 1.5 percent.  

“If a salary rise indicates an organization’s confidence in the future then, given the rise in pay predictions revealed by this research, private sector firms are becoming less wary of what the next 12 months has in hold for them,” said Charles Cotton, CIPD reward adviser. “By contrast, most public sector employers do know what the future has in store for them over the coming year.”
Source: CIPD