Sharp slowdown in jobs outlook suggests that recovery is slowing

Manufacturing is looking weaker, which will make it hard to build a recovery on exports, and weak consumer spending and public sector cuts are adding to the gloom

Britain's employment prospects are fading fast, according to a closely watched labour market survey to be published this morning, adding weight to doom-mongers' warnings that Britain's recovery is stalling

The balance of employers expecting to increase staffing levels over the coming three months has dropped to a net minus 1, and the out look over 12 months, is even worse, dropping to minus 6, from plus 2 in the previous quarter, according to the Labour Market Outlook survey from the Chartered Institute of Personnel and Development (CIPD) and KPMG. A score of zero is a stable outlook.

The past year has seen broad improvement in hiring expectations among the quarterly survey's 1,000 respondents, as economies picked up around the world, led by strong growth in India and China. The most recent official unemployment statistics also show a slight improvement in employment levels, albeit with continuing high levels of youth joblessness.

But recent weeks have seen a slew of increasingly gloomy statistics, particularly from the recently-buoyant manufacturing sector that has proved the engine of the UK recovery. This morning's report will make depressing reading for the Chancellor, George Osborne, who is facing growing criticism of his decision to stick to the planned £81bn of spending cuts despite the darkening outlook.

"The economic storm clouds are gathering," Andrew Smith, the chief economist at KPMG , said. "Fiscal tightening and the squeeze on real incomes, a worsening debt crisis in the eurozone and barely stall-speed growth in the US are all affecting prospects for growth in the UK."

The biggest danger is that weak private sector growth will be unable to offset the impact of spending cuts and job losses in the public sector.

Mr Smith said: "Hopes of a general rebalancing in the economy, away from consumption towards exports and investment, are being dealt a blow by sinking manufacturing confidence, undermining hopes that cuts in public sector employment will be offset by the private sector."

Although the CIPD/KPMG survey does show still show private sector growth over the coming quarter, the reading is considerably below last quarter's. Within the total, the manufacturing sector has slumped, while the public sector employment outlook remains broadly flat.

Gerwyn Davies, the public policy adviser at CIPD, said: "Increasing uncertainty about growth prospects in both the UK and global economies is now affecting hiring intentions; particularly in those industries such as manufacturing that stand to lose most in the event of a global slowdown. This will concern the Government as it attempts to rebalance the economy towards exports and investment."

The survey of hiring expectations also shows a growing regional divide, with a quarterly outlook of plus 10 in the south compared with minus 6 in the north.

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