Mini ‘boom’ experienced in the private sector job market, but for how long?

  21st September 2010      
 CIPD, Company News

The Chief Economic Advisor at the Chartered Institute of Personal Development (CIPD), Dr John Philptt, remarks on the official labour Statistics printed last week by the Office for National Statistics (ONS):

The private sector seems to have benefited from a mini jobs boom in the second quarter of the year as the economic recovery sped up, particularly with full-time employment illustrating a welcomed increase. This meant it was easy enough to offset a 22,000 fall in public sector jobs — following expectations – letting unemployment decrease in spite of a sharp rise in employment. The outcome was a ‘jobs rich’ recovery for the United Kingdom in the spring and early summer, in stark contrast to the jobless recoveries which occurred in the US and most of continental Europe over the past 12 months.

However, this mini jobs boom is not likely to last. This is partly due to the increase in employment which was most likely boosted by a unique relaxation of the recruitment freezes that were put in place in many private sector companies during the recession. In addition to this, many businesses that are still operating with fewer staff by having hoarded labour in the downturn, it may need a much stronger and continuous economic recovery in order to uphold employment rates. Undeniably, future surveys are set to show that hiring movements have dipped in the late summer, which may also demonstrate why the recent official statistics also show a minor drop in job openings in the quarter ending in August and a small increase in the amount of people who are unemployed and on jobseeker’s allowance.

The most recent figures will give substantial heart to those who consider the private sector will be more than capable of making up for the 600,000-700,000 public sector job cuts resulting from the coalition government’s intended severity measures, particularly if the average pay rises carry on failing to match price inflation, putting   downward pressure on real earnings. Nevertheless, with the restrictions on spending set to dent short-term forecasts for economic development, it is too early to be ruling out a renewed increase in unemployment once the cuts really begin to bite.

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