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Unemployment set to get worse - 03-01-2012
In its Annual Barometer report published today the Chartered Institute of Personnel and Development (CIPD) forecasts that the number of people in work in the UK will fall by 120,000 in 2012 despite a continued 'productivity pause' and further real pay squeeze, with unemployment rising to 2.85 million:

  • Private sector job creation is forecast to fail to offset a fall of 120,000 in public sector employment in 2012. This represents a mild rather than major jobs recession given a corresponding CIPD annual GDP growth forecast of 0.4% but means a continuation of the 'productivity pause' and severe pay restraint that has characterised the UK economy since the recession of 2008-9.

  • Unemployment is forecast to reach 2.85 million (8.8%) by the end of 2012. This would be the highest number of people unemployed since 1994 and the highest unemployment rate since 1995 (8.8%) but the first time that unemployment will have been this high and rising since 1991, when the economy was in recession. Unemployment is forecast to rise further to a peak of 2.9 million in the first half of 2013 before falling back to 8.8% by the end of 2013.

  • Government measures targeted at young unemployed people and long-term welfare recipients are forecast to contain long-term unemployment (i.e. people jobless for more than a year) below 0.9 million and to reduce headline youth unemployment to 0.92 million but to have no net effect on total unemployment in 2012.

  • The annual rate of economic growth is forecast to remain below 2% until 2014, which in combination with a return to faster growth in productivity will moderate the pace of jobs recovery and prevent unemployment from falling below 2.5 million before the middle of the decade.

Dr John Philpott, Chief Economic Adviser at the CIPD, believes that as long as there is a relatively benign outcome to the eurozone crisis we expect the 2012 jobs recession to be milder than that suffered in 2008-9. But unemployment in the coming year will be rising from a much higher starting point, so the UK jobs market in 2012 will be weaker than at any time since the recession of the early 1990s. The combination of worsening job shortages for people without work, mounting job insecurity and a further fall in real earnings for those in work may test the resilience and resolve of the UK workforce far more than it did in the recession of 2008-9, and foster a tetchy 'passive-aggressive' mood in many workplaces that could prove very hard to manage.

"This forecast is not as gloomy as it might be in a near stagnant economy since CIPD surveys of employers as yet detect no sign of an imminent widespread surge in private sector redundancies, though that remains a serious risk given the fragile state of business confidence. However, at some point private sector businesses will need to raise labour productivity back to more normal levels. If, as we currently forecast, the productivity pause isn't brought to an end by a much higher rate of redundancies in 2012, employers will inevitably be slow to recruit staff when the economy eventually picks up. The flipside of a mild jobs recession in 2012 is a mild jobs recovery in subsequent years and a correspondingly longer wait until unemployment starts to fall."


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