Job cuts slowing - except in the public sector

Just as private sector job cuts seem to be slowing, the public sector is starting to wield the axe.

by
Last Updated: 31 Aug 2010

The UK job market at least seems to be getting worse more slowly, according to the latest quarterly survey by the Chartered Institute of Personnel and Development: 10% more employers are planning to cut jobs rather than recruit during the three months to August, which is a big improvement on the 19% difference in the previous quarter. Private sector firms are noticeably more positive than last time round: just 2% more employers were planning to fire rather than hire, down from 30% last time. However, the bad news is that the public sector job market is now deteriorating at a rapid rate – which means the overall outlook remains pretty dismal...

Whereas private sector employers appear to be seeing some light at the end of a very dark tunnel, public sector employers are seemingly about to go deep underground. In the last CIPD survey, only 3% more were planning to cut rather than recruit; in the last three months, this has shot up to 28%. This isn’t entirely unexpected: the massive increases in state spending under the present Government, plus the recent fiscal boost, have arguably pushed public sector employment up to unsustainable levels. Now the books need to be balanced, spending cuts will be the order of the day: local authorities and other public bodies are being forced into budget cuts and restructuring, and that will lead to widespread job losses among the UK’s 6m public sector employees.

No surprises there. But we thought one of the more worrying questions raised by the CIPD today was whether the flexible working initiatives introduced by firms to tide themselves over during the recession – reduced hours, temporary pay cuts and so on – might actually lead to another big jump in private sector job cuts in the coming months. Keeping staff on, even at reduced rates, still raises costs and eats into profits, as the CIPD’s chief economist John Philpott points out. If the recovery turns out to be a lacklustre one, firms won’t be able to sustain this indefinitely, he says.

It does seem that the fiscal boost has had the desired effect, in that it's spread the pain a little bit and made sure that the economic collapse of the last year wasn't entirely calamitous. But since we're now likely to see an acceleration in public sector job cuts that will push the overall jobless count to about 3.2m some time next year (the latest official stats are out on Wednesday, and the only question is how bad they’re going to be); and since the CIPD also reports that average pay is increasing below the level of inflation (i.e. pay is actually declining in real terms), it’s clearly also going to make the recovery a rather weedy one...


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