Unemployment will continue to rise at least until the summer of 2010, peaking at 2.8 million, a leading business group predicted today.
The Chartered Institute of Personnel and Development (CIPD) warned of a “sting” in the tail of the recession, with a winter rise in job losses as firms assess prospects for the economy in the coming year.
Employers are set to decide to raise productivity and reduce labour costs, leading to “tough times” ahead for UK workplaces, the group said.
The report estimated that the number of people in work will fall by 250,000 between the third quarter of this year and the second three months of 2010.
The 2.8 million unemployment prediction is much lower than an earlier forecast by the CIPD of 3.2 million, with the report adding that the coming year will be better for jobs than 2009.
Dr John Philpott, the CIPD’s chief economic adviser, forecast a continued squeeze on pay rises next year, adding: “This could be difficult to deliver following a recession during which many private sector employees have experienced pay freezes or pay cuts.
“A slower than expected recovery or stronger earnings growth would threaten to raise peak unemployment to at least three million.
“The impact on jobs of planned cuts in public spending and tax increases, especially the 1 per cent hike in employers’ National Insurance Contributions from April 2011, is expected to be felt after the peak in unemployment.
“However, if employers were to anticipate the rise in NICs when making staffing decisions and/or there was a more immediate cut in public spending, which could be the case if the Conservatives gain power at the general election due in the first half of 2010, unemployment might peak at a higher rate than we currently forecast.”
Dr Philpott said private sector employers will seek to contain wage costs in the coming years, while public sector employers will have to cope with the consequences of “fast shrinking budgets and mass job downsizing”.
Commenting on the prediction, Work and Pensions Minister Lord McKenzie said: “We have invested £5 billion over the last year to help people who have lost their jobs during the recession get back into work.
“This has helped create new jobs, brought in extra frontline advisers to Jobcentre Plus and expanded access to training and apprenticeships.
“Our investment is having a real impact, with unemployment more than 400,000 lower than experts predicted at the last Budget.
“But times are still going to be tough for many, even as we move into recovery, and it is vital that we keep supporting people, investing in their future not abandoning them.”