UK jobs market improves, but more pain is around the corner

February was the seventh consecutive month in which permanent places rose according to the report produced by Markit for the Recruitment and Employment Confederation and KPMG. The index rose to 63.2 from 60.5 - anything above 50 indicates a rise.

Recruitment consultants reported that temporary placements also rose in February, but the rate of expansion was the slowest since November. They suggested the slowing pace of improvement was down to clients choosing not to renew contracts. The temporary placements index fell to 57.9 from 59.

However, the report warned that there was still pain to come for the British jobs market, as the prospect of spending cuts after the forthcoming general election posed a "major threat" to public sector jobs.

Bernard Brown, partner and head of business services at KPMG said: "The latest figures seem to confirm that the UK jobs market is on the road to recovery. Permanent job placements are growing at their fastest pace since July 2007, with both vacancies and salaries increasing. Sectors such as IT and computing as well as engineering and construction that were particularly hit by recession are clearly on the rebound.

"However, this all comes with one big warning: the impact of the inevitable public sector recession on the jobs market has yet to be felt and will be played out over the next six to 12 months."

In February however there was an increase in demand for staff for the fifth successive month, and the rate of growth was the strongest since July 2007. The staff vacancies index rose to 62.4 from 61.5.

Demand for permanent staff continued to rise, with the highest demand among secretarial and clerical workers, followed by IT and computing. The increase in demand was broad based across sectors, including financial and accounting, engineering and construction, nursing, and hotel work. Demand for temporary staff also increased and was broad based.

The report found that candidate availability rose but at a slower pace. Workers were also able to demand higher levels of pay, with growth in permanent staff salaries rising to a 20-month high.

"In some cases, higher salaries were linked by panellists to shortages of qualified staff. There were also reports of candidates becoming more confident in their outlook and subsequently pushing for enhanced pay packages," the report said.

Hourly pay rates for staff in temporary employment rose for the second month running in February, but the increase was only slight, and prior to January, temporary pay had fallen for 15 consecutive months.

The impact of the recession on overall unemployment has so far been much less severe than initially expected. The government has attributed this to the emergency measures it has put in place, as well as a more flexible labour market compared with previous recessions.

However, commentators have argued that the overall figures paint an overly rosy picture, arguing that unemployment has been lower because many people are settling for part time work because they are unable to secure a full-time position.

US job losses shrink as key sector surges

By Veronica Smith

WASHINGTON — Job losses narrowed and the massive US services sector expanded sharply in February, private data showed Wednesday, signaling a strengthening recovery ahead of a key government labor report.

Non-farm private jobs fell 20,000 in February on a seasonally adjusted basis, payrolls firm ADP said, matching the consensus forecast.

"The February employment decline was the smallest since employment began falling in February of 2008," the ADP National Employment Report said.

In another sign of an improving economy, the Institute of Supply Management reported services sector activity accelerated sharply in February from weak growth in January.

The ISM's non-manufacturing purchasing managers index (PMI) leapt 2.5 percentage points to 53.0 percent, beating the consensus forecast of 51.0 percent. Any number above 50 percent indicates growth.

Analysts noted that it was the highest reading in more than two years in the massive sector, which accounts for more of two thirds of the economy.

The data came ahead of Friday's highly anticipated government labor report, an important indicator of economic momentum.

Though the economy posted growth in the second half of 2009, snapping a year of contraction, the ailing labor market poses a major challenge to a sustainable recovery from the worst recession in decades.

Unemployment hovering near double digits has households hunkered down in the face of job insecurity. Consumer spending, which normally accounts for two-thirds of US economic output, has been lackluster.

The Labor Department's February labor data likely will offer little relief. Most analysts expect the unemployment rate ticked up to 9.8 percent from 9.7 percent in January, with nonfarm payroll losses unchanged at 20,000.

The ADP said that two large blizzards in parts of the East Coast had only a small effect on its survey findings, but warned that the official data from the Labor Department's Bureau of Labor Statistics, which includes government jobs, would be impacted.

"The adverse weather is widely expected to depress the BLS estimate of the monthly change in employment for February, but boost it for March," the payrolls firm said.

Ryan Sweet of Moody's Economy.com said that the report provides "a sense of how the labor market might have fared without the temporary disruptions from the storms."

He noted that ADP counts actual payrolls, unlike the government's survey which is "less likely to capture those people on short-term furloughs because of weather."

Joel Naroff of Naroff Economic Advisors said that because of the two different methods of calculating payrolls, "we are likely to see a lot larger drop in jobs on Friday than the 20,000 ADP estimates."

Still, he said, the ADP report shows that the services sector is firming and manufacturing is stabilizing, with firms either starting to add jobs or cutting payrolls more slowly.

"That holds out hope that once the weather turns decent again, which it apparently has started to do, we could start seeing the expected slow but steady increase in payrolls," he said.

The ADP said that 17,000 jobs were created in the services sector, the second consecutive monthly in the sector that drives more than two-thirds of the nation's output.

But that improvement was not enough to offset continued job destruction in the goods-producing sector, where 37,000 jobs were lost.

In that sector, 3,000 manufacturing jobs were created, the first rise since January 2008.

ADP noted that employment at medium-sized businesses -- employing between 50 and 499 workers -- rose for the first rise since January 2008, by 8,000.

Job losses in small businesses slowed 23 percent but still hit 18,000, or 90 percent of the month's losses.

Outplacement firm Challenger, Gray & Christmas, in a separate report, said companies announced plans to reduce payrolls in February by 42,090, a decline of 41 percent from January reading and the lowest level since July 2006.