Will public sector job cuts undermine economic recovery?
The CIPD warn that the UK job market could be hit even harder than expected.
The UK’s job market could be hit hard if economic growth falls even slightly short of official forecasts, a leading employment group has warned. The Chartered Institute of Personnel and Development (CIPD) said growth needed to be at least 2.5% between now and 2015 to maintain job numbers.
The Office of Budget Responsibility (OBR) is forecasting growth of 1.3% this year, 2.6% in 2011 and 2.8% in 2012 and 2013. The latest unemployment figures showed that there were a further 23,000 jobless people in the three months to April 2010, taking the total to 2.47 million. The unemployment rate also rose from 7.8 per cent in the previous quarter to 7.9 per cent.
The CIPD said that annual growth of 2.5% between now and 2015 was necessary for the private sector to create enough jobs to offset those that would inevitably be lost by government spending cuts announced by the new coalition government. The cuts are designed to reduce the UK’s large budget deficit. These cuts will see hundreds of thousands of public sector jobs go in the next few years, according to OBR figures.
The government argues that such cuts are necessary to restore confidence in the UK’s finances and in its economy. Critics argue that the cuts could undermine the recovery and cause a double-dip recession, brought on by increased levels of unemployment and the domino effect this would have on the economy, caused by decreased consumer spending and an increasing number of people receiving benefit payments.
The OBR forecasts a net gain in employment of 1.3 million between 2010 and 2015, the CIPD said. This means unemployment peaking at 8.1% this year before falling to 6.1%. The CIPD, however, forecasts a rise of just 100,000 by 2015 “on only slightly more pessimistic growth assumptions”. Under this scenario, the unemployment rate peaks at 9.5% in 2012 before falling to 8% by 2015. These figures suggest a very slow recovery for the jobs market and suggest the growth in unemployment figures could continue for some time to come. Interestingly, this also hints at what some experts have called a “jobless recovery” from the recession, with growth not reflected by increasing levels of employment.
