Demand for new candidates is at a four-year low but hiring expectations remain steady.

This is according to the latest quarterly CIPD/KPMG Labour Market Outlook (LMO) survey of UK employers, which finds hiring expectations little changed between the winter and spring quarters, following the marked softening in employer sentiment that occurred between the autumn and winter. Pay rises meanwhile remain modest, and there is no sign of higher living costs inflating pay deals.

The survey finds that overall demand for staff is weaker than in any of the spring surveys since the LMO series began in spring 2004, yet the survey authors say that employers seem to be adopting a cautious ‘wait and see’ approach to their staffing requirements rather than taking drastic action to cut jobs.

Thirty-seven per cent of the 735 employers questioned by Ipsos MORI expected to increase staff levels in the spring quarter (March-May 2008). Almost two in five employers surveyed intended to carry out a staff pay review in the spring quarter. Of these, a quarter expected to be awarding average pay increases of 2% and almost a third expected increases of 3%.

Dr John Philpott, chief economist at CIPD, warned: “With employers in ‘wait and see’ mode it remains possible that falling confidence in the outlook for the economy might still trigger a wave of job cuts. If so the tipping point in confidence could result in a sudden avalanche of redundancies and quickly transform the current relatively benign jobs scene. A further early cut in interest rates would be advisable to limit the chances of this outcome.”