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Job cuts move from private to public sector

'Getting worse more slowly' as recession is nationalised

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Just as confidence is starting to stabilise in the private sector, so employment prospects in the public sector seem to be getting worse.

A survey from the Chartered Institute of Personnel and Development and KPMG found fewer firms are expecting to lay people off, and those that are planning to do so expect to make smaller cuts.

The quarterly survey covered 900 employers in all sectors of the economy found some signs of recovery compared to last quarter. The difference between organisations expecting to hire more people and those expecting to cut headcount is -10 per cent this quarter, compared to -19 per cent last quarter. For private firms the situation is even better - the negative balance is -2 per cent versus -30 per cent in the spring.

But in the public sector this figure has slumped from -3 per cent to -28 per cent.

Employers who expect to lay people off in the next three months are predicting cuts of 4 per cent compared to 6.5 per cent last time.

Expectations of pay rises have fallen to 1.7 per cent, below consumer price inflation, which was 1.8 per cent in June.

The Institute also warned that companies which were cutting staff hours and keeping a lid on pay rises despite falling orders may be preventing job cuts, they were still effectively pushing up unit labour costs and could be hit by a further wave of redundancies if orders do not improve.

Dr John Philpott, chief economist at the CIPD, said: “When it comes to the immediate jobs outlook, the best that can be said is that things are getting worse more slowly. Employment will keep falling and unemployment is still on course to top 3 million in 2010.

“While pay restraint or cuts in hours of work has helped save many jobs that might otherwise have been lost during the recession, holding onto staff when order books are far from healthy pushes up unit labour costs and eats into company profits. This can’t be sustained indefinitely – a weak economic recovery, let alone a double dip recession, might well cause many employers to reassess current staffing levels before too long.”

Andrew Smith, chief economist at KPMG, said the large number of firms either deferring or cancelling pay reviews showed that companies are unconvinced by supposed "green shoots" of recovery.

Figures released last week from the US Bureau of Labor Statistics also found things getting worse more slowly, as 247,000 people lost their jobs in July, compared to 467,000 job cuts in June. ®

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