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UK – Jobs outlook positive in the short-term, but uncertain going forward

11 November 2013

The short-term jobs outlook is increasingly positive, but over the medium term employers might be planning a more measured approach to increasing their overall employment levels as the economy improves, according to the latest CIPD/SuccessFactors Labour Market Outlook.

The report also finds that optimism is highest in the manufacturing and production (+39) and retail (+51) sectors and among employers in the south east of England (+35).  In contrast, employment looks set to contract in the north of England (-5) and the public sector (-19).

However, the findings of this survey of more than 1,000 employers, conducted by YouGov, suggest that most employers do not expect to see very substantial growth in employment over the medium term.  Less than one in five employers (17%) report that they would increase their head count by more than +2% if we were to see stable economic growth of +2% or more.  

Meanwhile, more than two fifths (42%) said they would leave staff levels unchanged. Almost a quarter of those employers (23%) who say that they will not increase staff by more than +2% would not require more staff because they expect productivity to improve when the economy picks up.  A fifth of employers surveyed suggested that labour costs would mean they were unable to increase the number of people employed, which is probably the effect of budget control, particularly in the public sector. 

The report also finds that pay expectations have fallen marginally since the previous quarterly report. Excluding bonuses, the mean basic pay is predicted to increase by +1.6% over the next 12 months, a reduction compared with the figure of +1.7% forecast last quarter.  Excluding employers that are maintaining pay freezes, or expecting pay decreases, private sector employers expect to give an average increase of +2.8% to staff, which compares with +1.5% in the public sector and +1.5% in the voluntary sector.  

Gerwyn Davies, Labour Market Adviser at the CIPD, said: "The relationship between pay, productivity and employment is key to understanding the performance of the labour market in recent years.  Nonetheless, while it appears that low productivity and falling real wages have helped maintain employment levels, it seems that rising demand and restructuring have also been having an important impact on resourcing decisions in many firms.  Now, with clear signs of further rises in demand for goods and services, it is unsurprising to see employers intend to take on even more people in the short term.”

"However, our data on medium-term recruitment intentions suggest that stronger economic growth in the next few years will not be accompanied by big rises in employment.  With many employers retaining knowledge and skills during the last few tough years while also restructuring and recruiting for the future, they seem confident that they will be able to deliver their business objectives without needing to dramatically increase staffing over the medium term.  Instead, many employers tell us they are focused on the need to raise productivity.  The prospect of better economic conditions might therefore persuade them to invest more in the business and make more intensive use of existing staff, for example, by increasing working hours.”   

"Many employers have told us they've implemented widespread restructuring during the last few years, partly to take advantage of new markets.  The sharp rise in the number of managers and senior officials during the same period would also suggest that businesses have made broader efforts to stimulate demand in the face of challenging business conditions, which may partly explain the relative recent strength of the labour market,” Gerwyn Davies added.  

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