According to the CIPD/KPMG survey of employers' the jobs market in the UK is getting rapidly worse. This should not come as too much of a surprise.

It should be remembered though that this survey is now a bit historic and was undertaken in a period of particularly bad economic and financial market news. I would suggest that this news is slightly redundant (excuse the pun) and we should look to more recent indicators as a better reflection of what is going on.

The survey asks respondents their plans for recruitment and redundancies in the first quarter of 2009. It seems strange to me then that they would release this information on 9 February when we are already half way through the quarter.

"The latest quarterly CIPD/KPMG survey of employers’ recruitment and redundancy plans indicates that UK job prospects are deteriorating ‘at an alarming rate’ while the size of average pay rises is shrinking.

The winter Labour Market Outlook (LMO) survey of 892 UK employers, conducted by Ipsos Mori at the turn of the year, finds that more than one in three (36%) plan to cut jobs in the first quarter of 2009 – double the proportion expecting to make job cuts at the time of the previous LMO survey last autumn.

The LMO records a negative balance of -9 percentage points between the proportion of employers planning to cut jobs (36%) and the proportion planning to hire additional staff (27%). This is the first such negative balance recorded in the five years since the LMO survey began in 2004.

The latest LMO survey also finds that employers intend to keep a much tighter rein on pay increases in the coming months. Those who plan pay reviews expect staff pay to increase on average by 2.6%, much lower than the 3.5% average increase expected last autumn. But as many as one in eight employers don’t intend to conduct a pay review at all in 2009."

Source: www.cipd.co.uk

Unemployment continues to grow across the globe, with no countries remains unaffected by the global recession. In the Unites States the unemployment rate reached 7.2 per cent in December, its highest level since 1992. This followed a loss of almost 600,000 jobs in the month, the largest drop in over thirty years. Unemployment will continue to rise in most countries for the majority of 2009.

Nevertheless for the first time in quite a few months the latest economic data has started to show some glimmers of hope. This is not to say that there has been a dramatic improvement in the global economy, but there are perhaps some signs that the rate of economic contraction is decelerating. Although this means that the economy is still shrinking it could be the first steps towards reaching a trough.

Earlier this week the Purchase Manager Indices (PMI) figures for manufacturing and services showed an improved economic environment in both the UK and Europe. It showed that manufactures were benefiting from lower input prices, whilst those in the UK were starting to be helped by the rapid weakening of the pound. Services in the UK and Europe were also buoyed as lower interest rates and government intervention increased the outlook for the sector.

Later in the week the US ISM survey of non-manufacturing businesses improved for the second month in a row. It indicated that business conditions were improving, despite new orders continuing to fall. The US PMI manufacturing survey also increased in the month. Again both indices were improved but implied further economic contraction.

It should be remembered that these figures are indicating changes in the month, and therefore it is dangerous to read too much into them. It should also be noted that the employment parts of these surveys continue to deteriorate, representing an acceleration of unemployment.

Nevertheless the stage is being set for what will be a long crawl back to positive economic growth. Inflation continues to fall in Europe and the US, giving policy makers the room to cut interest rates further or to use monetary stimuli such as quantitative easing. Falling inflation will also help to boost real incomes, whilst reducing the attractiveness of savings, providing a much needed boost to consumer spending.

On top of this, lower interest rates and rising unemployment will provide benefits to business. Although, banks remain unwilling or unable to increase lending to businesses, there are early signs that the bond market is starting to re-open (although at a high price), whilst some bank facilities have become significantly less expensive. In addition, being able to cut jobs has enabled some companies to reduce costs, increase productivity and adapt to the changing business environment.

A return to normal economic conditions remain a long way away, even positive quarterly economic growth is unlikely in a number of countries until 2010. However, should the latest economic indices continue to improve then perhaps we are seeing a light at the end of the tunnel. The tunnel is likely to be quite long, but now could be the best time to start preparing for the upturn.

It came as no surprise yesterday that the UK is now officially in a recession. With the economy shrinking in the third quarter of the year, the economy certainly hadn't improved in the final three months of the year. The economy contracted by 1.5% in the final quarter of the year, having shrank 0.6% in the third quarter.

These figures confirmed that despite the government's attempts to stimulate the economy through measures such as a cut to VAT and capital injections into the banks, and the Bank of England's historic interest rate cuts, the economy shrank at an accelerated pace.

Like the USA, Japan and the eurozone, which were confirmed as in recession at the end of the third quarter, the UK is now officially in recession, and is unlikely to emerge from recession for some time.

Historically recessions tend to last about fifteen months, but given the global nature of this recession and the severity of the economic imbalances in the UK this recession could last longer. It will almost certainly be longer before the UK returns to its natural rate of economic growth (approximately 2.5% per annum).

Given that the USA is further through its recessionary cycle than other economies, it is likely that they will emerge from their recession before other parts of the world. The country also has the capacity to spend its way out of this recession. Given the massive fiscal stimulus planned by the new Obama administration, this could pull the US out of recession by the middle of 2009.

Increased optimism following the election of President Obama should also help to stimulate the economy as consumers feel positive enough to spend and businesses prepare for an upturn. This break from the old could have a significant impact on the economy.

The eurozone and Japan are likely to follow the United States. Once the US starts to grow again global demand and global confidence is likely to improve. Japan and eurozone countries like Germany rely heavily upon exports and therefore global demand is fundamental in their economic revival.

These countries also benefit from having less consumer debt and fewer economic imbalances (e.g. house price over valuation) than countries such as the UK and USA. Therefore the downwards economic cycle should have less corrections to make before stability returns. Less personal debt and higher savings will mean that consumers in places such as France and Germany will be able to benefit from falling prices, prompting an increase in consumption that will aid the recovery.

The UK is likely to be one of the last developed countries to come out of the global downturn. It faces a number of problems that will prolong the correction in the economy. For one the UK economy relies heavily upon global finance as a proportion of GDP and as an employer. Therefore with this sector in chaos the economy has been hit hard.

Secondly UK households do not have a massive amount of savings to protect themselves through the economic slowdown. Having spent heavily and saved little in previous years the UK consumer is likely to sharply cut consumption in order to build up protective savings. This will reduce retail spending, a key part of the economy.

Third, with the UK government attempting to support the banking sector it has built up a massive debt. Like the UK consumer the British government did not save in the good years and therefore does not have a surplus available to add much extra stimulus to the economy.

Finally, UK house prices were some of the most over valued in the developed world and as a result will need to fall further than in other countries. This will again weigh on consumer confidence and will also hit bank balance sheets.

This is not to say that the UK will be in permanent decline. The rapid weakening of the pound will stimulate exports from the UK. This will take some time to occur as the world economy slows and as international importers adjust their supply chain to the UK.

The UK also benefits from a highly skilled and flexible labour market. Unlike some European countries the UK's labour laws encourage the use of temporary workers and place less barriers to employment. They also allow employees to be sacked or made redundant more easily. Although not a great thing if you are one of the people losing their job, but it will mean that British businesses can reorganise and cut costs more quickly and cheaply than other countries.

Finally the Bank of England has cut interest rates quickly and will continue to cut to near zero. Along with quantitative easing ("printing money") this will act as a further stimulus.

In all these countries, particularly the USA and the UK, the way out of recession will require the banking system to move back to some sense of normality. This is not going to be easy and could be some way off. Without it though, businesses will continue to be unable to borrow and therefore invest and consumers will be unable to get mortgages or loans to buy houses, consumer or start entrepreneurial activities.

So as it stands here are my forecasts for when recession will end (i.e. first quarter of positive growth):

USA - Q3 2009

eurozone - Q4 2009

Japan - Q4 2009

UK - Q1 2010

UK governments plan to create more internships - The UK government is planning on giving unemployed graduates three month paid internships as a way of increasing skills, work experience and reducing unemployment.

Banks keen to employ graduates - Banks are keen to continue to employ the best young graduates whilst continuing to cut the jobs of more experienced staff. Graduates are proving attractive to banks as a cheap source of labour that will be available and ready for when the markets recover.

Help for long term jobless - The UK government announces plans to tackle long-term jobless, i.e. those unemployed for over six months. Unlikely to be a significant change in policy as tackling long-term unemployment has been a stated goal of the government since 1997.

Obama jobs stimulus plan - It is estimated that Obama's fiscal stimulus could create four million new jobs. It is hard to see how this figure has been calculated and will almost certainly be way off.



US unemployment increases to 7.2%, half million jobs lost in December - US unemployment surged to a 16-year high of 7.2 percent as a deepening recession pushed employers to shed a massive 524,000 jobs in December, capping a yearly loss of 2.6 million, data showed Friday.

A report published today by the Recruitment and Employment Confederation (REC) and KPMG showed a sizable weakening in the labour market and the demand for employees.

According to the press release that accompanied the report...

...For the third consecutive month, recruitment consultants reported declines in permanent and temporary staff pay during December. Anecdotal evidence suggested that rapidly rising levels of staff availability had diluted candidates’ bargaining power.

Reflective of recent redundancies and fewer job opportunities, the availability of staff to fill vacancies continued to rise substantially in December. The latest improvements in permanent and temporary staff availability were the strongest since the inception of the survey in October 1997.

Kevin Green, Chief Executive of the REC, said:“These figures are deeply worrying and show that the contraction in the labour market is now rapidly accelerating. The decline in both permanent and temporary appointments in December is the sharpest recorded since the survey began in 1997.

“At a time when the Government is proposing job creation measures, the REC will be seeking urgent meetings with the Government about its proposed removal of the VAT concession in April. This change could help retain 150,000 temporary jobs at a time when we should all be working together to create employment opportunities, not taxing them out of existence."

Mike Stevens, Partner and Head of Business Services at KPMG, added: “These latest figures only serve to confirm the most pessimistic projections for the UK jobs market. They are also a lead indicator for a rapidly declining employment situation which is not yet reflected in the government's current employment statistics. One reason for this is that employment legislation – enacted since the last recession – tends to defer the incidence of job losses pending completion of consultation periods."

It’s not just those small companies or those that were already on the way down that are suffering at the moment. M&S announced today that they will be shedding 1,230 jobs in the UK and closing 27 of its small food stores.

It is not too surprising that M&S has been forced to make these cuts. The signs seemed pretty obvious well before today, as they announced 20% sale after 20% sale in the weeks running up to Christmas. Although the shops were packed on those sale days, it was a terrible indication of the state of the business.

This has not been a good week for those working in the retail industry...and its only Wednesday. On Monday Adams, which fell into administration after Christmas, cut another 850 staff, while Passion for Perfume collapsed leaving 185 people jobless. Whilst just today the womenswear company Viyella called in the administrators, putting at risk another 450 jobs.

Things are only going to get worse on the high street in the next few weeks and months. It seems now seems even more important than ever that the government stops playing politics with policies such as VAT cuts, and focuses upon the problems in hand. First step for retailers, get the credit insurance market working asap.

Friday sees the release of the US Labor Department's monthly jobs data which is likely to show that the number of jobs lost in in the US during 2008 was the highest since 1945.

According to the median estimate of economists surveyed by Bloomberg an additional 500,000 jobs were lost in December, resulting in a cumulative reduction in headcount of 2.4 million in the year.

Despite Barack Obama's grand plan for an extensive fiscal stimulus, the US economy will continue to slash jobs throughout at least the first half of 2009 and for possibly longer.

The unemployment rate, which stood at 6.7% in November, is likely to have climbed to 7% in December, the highest level since 1993. It would not be surprising to see this figure edge towards double digit figures especially if the fiscal stimulus and cuts to interest rates don't have the desired effect.