Overall employment levels set to grow due to private sector hiring surge, says CIPD/KPMG quarterly survey, despite widespread cuts in public sector

THE LATEST quarterly CIPD/KPMG Labour Market Outlook survey of almost 800 employers signals that the UK’s emergence out of recession is now leading to better job prospects. Yet it also reveals a stark difference between job prospects in the private and public sectors: while private sector employers are more optimistic about creating jobs in the second quarter of 2010, public sector employers are radically more pessimistic about employment intentions compared with three months ago.

The overall net balance between the percentage of employers expecting to recruit and those expecting to cut staff across all sectors of the economy is now positive (+5%) for the first time since winter 2008.  This represents an overall increase from -5% in the previous quarter.  The findings show, however, that this positive growth is almost wholly down to a sharp rebound in the private sector, which recorded +29% (up from +5% in the previous quarter).  The growth extends to sectors that have been badly affected by the recession, such as manufacturing (+24%).

In contrast, the net balance for the public sector is -43%, the largest negative balance since the survey began in 2004. Falls in employment are particularly widely anticipated among local authorities and central government (-59%), in education (-45%) and in healthcare (-38%).

The report also highlights a divide in the job growth prospects between London and south England, which are going to be the main engines of growth, and the rest of UK regions. The overall net balance for London and the south of England has risen sharply to +21% from -3%; while employment looks set to continue to fall in areas such as Scotland (-25%) and Wales (-23%).

The predicted average pay award in the private sector in the twelve months to April 2011 will be 2%, which compares with just 1% in the public sector. Almost one in five (17%) public sector employers plan to freeze pay, which compares with just 4% of private sector employers.

Gerwyn Davies, CIPD public policy adviser and author of the report said, “The recession represents a long, dark winter for the jobs market.  However, a return to spring could mean a growth of full-time jobs in the private sector that may continue if the global economy continues to recover at the same rate. This will boost private sector workers’  prospects as the majority will no longer face potential overwhelming unemployment, pay freezes and lack of promotion.  It also raises hopes that we may be close to a peak in unemployment.

“In contrast, public sector employers will be looking to close the lid on employment, pay and promotion.  This will present huge challenges to public sector managers in their attempt to keep employees engaged; particularly if the cost of living continues to rise. It will also present challenges to the employment participation rate of women and the economic development of some UK regions, which have both been boosted by record increases in public spending in the past decade.”

Alan Downey, head of public sector at KPMG, said, “The survey shows that public sector employers have woken up to the scale of the financial challenge that is coming their way.  It has been clear for some time that the steady increase in public sector jobs would have to come to an end.  So the change in attitudes is not in itself a surprise.  What is surprising is the speed and extent of the U-turn in attitudes.

“Just three months ago public sector employers were relatively optimistic and many were continuing to recruit.  Now they are massively more pessimistic than their private sector counterparts about job prospects, with more than 40% contemplating a reduction in headcount and a significant number planning a pay freeze.

“It is clear that the chill wind of the recession has reached the public sector with a vengeance.”

Other key findings:

• The upturn in the economy is increasing demand for migrant workers.  The proportion of migrant employers expecting to recruit migrant labour has more than doubled over the previous three months. Fifteen per cent of employers are now planning to recruit migrant workers, up from 7% in the winter report.  In addition, the proportion of employers that have recruited migrant workers in the first quarter of 2010 has increased to a quarter (25%) from around a fifth (19%) in the previous report.
• Around four fifths of new recruits (78%) will be full-time workers, which is broadly in line with the current make-up of the labour market. This may signal a return to more full-time employment following the surge in part-time employment over the past 18 months.
• Only 14% of employers plan to hire 16-17-year-old school-leavers, almost a third (32%) plan to recruit school-leavers aged 18 and above and almost half (47%) of employers plan to hire graduates in the three months to July.  All these figures are slightly lower than those recorded in spring 2009.
• Almost one in four employers (24%) plan to hire apprentices in the six months to September, while more than one in five employers plan to hire interns (21%).  In the summer 2009 report, almost a quarter of employers planned to hire apprentices (23%) while just thirteen per cent planned to recruit interns.