CIPD predict a 'difficult' 2005 for employers

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Latest figures which show that jobless numbers are sliding as the labour market continues to stabilize is cause for concern, say the Chartered Institute of Personnel and Development (CIPD).

The number of people out of work in the UK fell by 29,000 between August and October to 1.39 million.

According to John Philpott, Chief Economist at the CIPD the monthly job statistics show the potential for pay pressure.

Dr Philpott commented:

"The latest official jobs data from the Office for National Statistics present the Monetary Policy Committee (MPC) with a dilemma and indicate that 2005 could be a difficult year for employers.

"Following a mid-year hiatus a combination of rising employment, falling unemployment and increased numbers of economically inactive people has turned up the heat in an already tight labour market. Signs of mounting pay pressure in the autumn months, especially in the public sector, are a particular cause for concern given that current and future pay demands are being driven up by rising retail price inflation.”

Philpott added that employers will face a tough bargaining environment and will have to take action to contain wage costs ‘if profits and investment plans are not to be squeezed.’

“The MPC, meanwhile, may by spring 2005 have to act to cool the labour market in the knowledge that a hike in interest rates for this reason could have serious destabilising effects on other parts of the economy. Much will rest on sensible and forward looking behaviour on the part of pay bargainers."

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