UK – Near-term employment prospects remain buoyant CIPD finds

The quarterly CIPD Labour Market Outlook (LMO) provides a set of forward-looking labour market indicators, highlighting employers’ recruitment, redundancy and pay intentions. The survey is based on responses from 1,013 employers, many of whom are drawn from the CIPD’s membership of more than 130,000 professionals.

The latest report shows that near-term employment prospects remain buoyant. This quarter’s net employment balance – which measures the difference between the proportion of employers who expect to increase staff levels and those who expect to decrease staff levels in the second quarter of 2015 – has increased to +25 from +24 since the winter 2014/15 report (Figure 1).

Private sector firms continue to be driving much of the predicted growth in employment prospects (+37). At the same time, employment confidence in the manufacturing and production sector has increased to +51 from +28. However, consistent with the most recent official GDP figures, which showed a slowing
in the rate of growth in the service sector, employment confidence in the services sector has fallen to +31 from +38 since the LMO winter 2014/15 report.

Indeed, the recent fall in economic growth and the continued subdued productivity growth may partly explain why wage settlement expectations have fallen over the past three months. The median basic pay award in the 12 months to March 2016 decreased from 2% to 1.8%.

This modest fall is also consistent with other survey indicators (EEF, Xpert HR) and the most recent official statistics, which showed that basic pay rose by 1.8% in the three months to February 2015 compared with a year earlier. Public sector organisations’ predictions of median pay increases of 1% will continue to lag behind those in the private (2%) and voluntary sectors (1.4%). On the upside, half of employers predict awarding basic pay increases of 2% or more in the 12 months to March 2016.

Evidence from this report suggests that affordability, which is inextricably linked to productivity growth, and pay restraint in the public sector are the two main reasons why pay remains weak. In addition, around a quarter of private sector employers who say they cannot meet the Bank of England’s inflation rate target of 2% cite no recruitment and retention pressures. This suggests that while some employers may be experiencing labour or skill shortages that are reported in other surveys, other employers have some degree of labour market slack.

This tale of two workforces is also reflected in the distribution of pay awards. More than a third of organisations froze basic pay in the 12 months to March 2015, while a slightly higher proportion (41%) gave a basic pay award of 2% or more.

Overall, in a continuation of recent trends, the data suggest that the labour market will continue to strengthen in the second quarter of 2015, but with more modest wage growth than three months ago.

Chosen excerpts by Job Market Monitor. Read the whole story at  Labour Market Outlook: Spring 2015 – Survey Reports – CIPD.