Recovery 'may mean redundancies'

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A survey of 900 employers found signs of improved employer optimism in private firms, where demand for staff was starting to stabilise.

But the Chartered Institute of Personnel and Development (CIPD) warned that this was being offset by mounting pessimism in the public sector.

The group warned that a weak economic recovery could trigger a renewed burst of redundancies in the private sector if corporate profits continue to be squeezed by fast rising unit labour costs.

The research also found that the pay outlook had worsened, with only 15% of respondents planning to conduct a wage review this quarter - less than half the number of the last few months.

Average pay increase expectations have dropped below the rate of inflation to 1.7%.

Dr John Philpott, chief economist at the CIPD, said: "When it comes to the immediate jobs outlook, the best that can be said is that things are getting worse more slowly.

"Employment will keep falling. Unemployment is still on course to top three million in 2010 - and it is far too soon to rule out another avalanche of private sector redundancies later in the year.

"While pay restraint or cuts in hours of work has helped save many jobs that might otherwise have been lost during the recession, holding on to staff when order books are far from healthy pushes up unit labour costs and eats into company profits.

"This can't be sustained indefinitely - a weak economic recovery, let alone a double dip recession, might well cause many employers to reassess current staffing levels before too long."