Jobs outlook could be hit if growth falters marginally

14 July 2010

The UK labour market could face a five-year jobs deficit if the growth predictions of the Office for Budget Responsibility (OBR) are just slightly weaker.

The warning has come from the Chartered Institute of Personnel and Development (CIPD) in a new report.

The CIPD claimed that the growth figures put forward by the OBR need only to be a little lower for the jobs outlook to deteriorate markedly over the next five years.

The OBR is forecasting growth of 1.3 per cent this year, 2.6 per cent in 2011 and 2.8 per cent in 2012 and 2013.

However, the CIPD has estimated that it will require an average annual rate of economic growth of 2.5 per cent between now and 2015 in order for the private sector to create sufficient new jobs to counterbalance the losses that cuts in public spending will bring.

Growth even slightly less than this, between 2-2.5 per cent per year, would seriously diminish overall jobs prospects, the CIPD argued.

According to the OBR's predictions, the total number of people in work starts to rise next year and continues to rise through to 2015, resulting in a net gain in employment of 1.3 million between 2010 and 2015.

The CIPD, by contrast, on only slightly more pessimistic growth assumptions, forecasts the economy will shed 300,000 jobs by 2012 before renewed job creation boosts employment by 2015 to around 100,000 above the level in 2010, far short of the 1.3 million extra jobs the coalition government is hoping for.

John Philpott, the CIPD's chief economic adviser, said: "Against the backdrop of massive public sector job downsizing it doesn't require anything like a double-dip recession to cause a serious prolonged jobs deficit, merely economic growth in the range of 2-2.5 per cent per annum rather than the 2.5 per cent (above trend) annual growth rates the OBR expects.

"A slightly milder growth outcome - which many would consider a decent recovery in output given the various strong headwinds at present facing the economy - is easily as imaginable as the OBR's central forecast and would leave unemployment still close to 2.5 million by 2015, meaning Britain faces at least half a decade of serious prolonged jobs deficit.

"So will, fiscal pain spur private sector jobs gain, as the coalition's economic strategy assumes? Yes, but probably not very much and certainly not any time soon."