Job losses are set to increase and recruitment activity among firms is falling, according to a gloomy survey today showing a "big dip" in work prospects.
A study of 1,200 UK firms showed a huge drop in the number of employers expecting to hire new staff in the next few months.
Fewer than a third of those questioned by the Chartered Institute of Personnel and Development (CIPD) expected to increase staff levels, compared with 37 per cent earlier this year and 58 per cent when the survey began in 2004.
The number of employers planning redundancies increased from 22 per cent to 27 per cent between the second and third quarters of this year.
John Philpott, chief economist at the CIPD, said: "The jobs market has been one of the few bright spots in the UK economy, but cracks are appearing in the face of an increasingly uncertain economic outlook.
"Even if we avoid the scale of jobs fallout suffered in previous downturns, the era of the candidate's recruitment market is already over, with people in work becoming increasingly anxious that their P45 might soon be on its way.
"With pay pressure still subdued, mounting job insecurity is being compounded by a significant squeeze on workers' real incomes. But the absence of any sign of an emerging wage-price spiral at least offers greater hope that the Bank of England might soon be able to cut interest rates to head off the threat of recession."
Andrew Smith, chief economist at KPMG, which helped with the research, added: "Companies are now reacting to deteriorating market conditions. With sales slowing and input costs rising, but scope to raise prices limited by weakening demand, finances are under pressure.
"It looks as if employment costs, the main area over which businesses retain control, are taking the strain with employers seeking both to keep a lid on pay settlements and, in increasing numbers, planning for redundancies. The labour market is suddenly looking a lot less resilient."
Average pay rises are expected to rise by 3.7 per cent in the coming months, in line with recent settlements, the study found.Reuse content