By Marcus Leach

The employment recovery is set to slow sharply, according to this summer’s Labour Market Outlook survey of over 1,000 employers from the Chartered Institute of Personnel and Development (CIPD) and KPMG.

On average, growth in hiring intentions have been reported throughout the past year, but a more sombre outlook is now being driven by a fall in confidence among private sector employers, particularly in manufacturing.

The Labour Market Outlook net employment index, which measures the difference between the proportion of employers that intend to increase total staffing levels and those that intend to decrease total staffing levels in the third quarter of 2011, has fallen to -1 from +3 in the past three months. Long-term prospects are even worse, with the twelve-month employment index falling to -6 from +2 last quarter.

Figures for the three-month index show that the private sector will grow (+23), but at a less solid pace than the previous quarter (+32). The fall in confidence is particularly marked in the manufacturing sector, which has decreased to +11 from +32 three months ago. Confidence in the public sector remains at the same negative level as last quarter (-51 compared to -52). The voluntary sector remains just in the black (+7 compared to +6).

Regional differences are just as stark as those between the employment sectors, with survey findings pointing to a further widening of the north-south divide. The three-month net employment balance for the south of England is +10 across all sectors, while the balance for the north is -6.

“Increasing uncertainty about growth prospects in both the UK and global economies is now affecting hiring intentions; particularly in those industries such as manufacturing that stand to lose most in the event of a global slowdown. This will concern the government as it attempts to rebalance the economy towards exports and investment," Gerwyn Davies, Public Policy Adviser at the CIPD, said.

“Together with the public sector redundancies, which will affect one in twenty front-line workers according to our survey, the recent story of an employment revival may become one of an employment relapse.

"The survey evidence suggests that the relapse will hit some regions much harder than others, which points to the further development of a two-speed economy.”

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