The CBI has warned that unemployment will remain “stubbornly high” over the next two years, as new figures revealed that hiring in January grew at the fastest rate for six months.
The employers’ lobby group predicted that the number of people out of work would jump from 7.9% last year to peak at 8.4% or 2.71 million by the end of this year. But unemployment would fall only marginally during 2012 to 2.64 million by the fourth quarter.
The organisation also forecast that pay growth would strengthen “a little” over the next two years, but with household spending expected to remain “subdued” as a result of higher inflation, VAT hikes, low wage increases, higher mortgage interest rates and ongoing concerns over unemployment, economic growth would be “rather anaemic and sluggish”. It would increase somewhat during 2012, however.
Ian McCafferty, the CBI’s chief economic adviser, said that, while he did not foresee a double dip recession, growth at this stage was far less robust than he would normally expect for the second and third year of an economic recovery.
“Persistently high levels of inflation caused by rising energy and commodity prices and the VAT increase are also a concern,” he added.
A study of 400 recruitment agencies undertaken by the Recruitment and Employment Confederation and management consultancy KPMG, meanwhile, indicated that, while the jobs market was likely to remain “volatile” over the next few months, hiring rose at the fastest level for six months as employer confidence started to return.
Permanent staff appointments rose to 57.4 in January, up from 54.9 the month before and 56.3 in August last year, with figures above 50 representing growth. The most sought-after jobs were in IT, engineering and construction, executive roles and accounting, while nurses saw the weakest rise in demand. Last year, they were considered the second most employable group.
The ‘Report on Jobs’ also indicated that the number of temporary vacancies also increased at the fastest pace in three years, although pay fell for the first time in four months.
The REC’s chief executive Kevin Green said: “As anticipated, this month’s report on jobs shows that economic activity accelerated in January, with employers increasing their hiring, albeit not in large numbers. Employer confidence, which up until now has been fragile, is finally starting to harden.”
But he warned that the coalition government must take action to get the one million young people currently unemployed into work and recommended that it provide incentives to small-to-medium businesses to hire them. It should also provide more career and job-search support to those looking for work, Green added.
