"Breathtaking" deterioration in job market

Jobs are being cut at an "alarming rate", according to an employment forecast for the next three months that predicts a "downward spiral" in the market.

The Labour Market Outlook, produced by the Chartered Institute of Personnel and Development and KPMG, found that more than a third of businesses (36%) are looking at axing jobs - twice the number that were considering it in Q4 of last year.

In comparison, only 27% are planning to take on extra staff.

The resulting -9% balance between those firms planning to create jobs and those expecting to cut them represents the first negative value in the five years since the survey's inception in 2004.

And for those who hold on to their jobs there is further bad news - employers are anticipating lower average pay increases (2.6%) than the 3.5% expected last autumn, while one in eight businesses are not planning a pay review at all in 2009.

KPMG chief economist Andrew Smith said money needed to be injected into the system to ensure the downward spiral of the employment market did not turn a recession into "something worse".

"The speed of deterioration in the labour market is breathtaking," he added.

"Higher unemployment will weaken demand which in turn will lead to higher unemployment."

Meanwhile, the Federation of Small Businesses has added its voice to growing concerns from business groups that the Government needs to act urgently to kick-start the economy.

A poll of more than 4,000 businesses found that Government measures have not helped firms, with more than half those replying saying their trade had slipped in the last two months.

IMAGE Lewis Whyld/PA