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Unemployment in the UK is likely to peak at 2.8 million in 2010, latest forecast from the Chartered Institute of Personnel and Development or CIPD showed Monday. This is better than 3.2 million predicted in its mid-2009 forecast.
The business group said unemployment will continue to rise until at least the summer and there will be below inflation pay increases for most people in work. The CIPD forecasts that the number of people in work will fall by 250,000 between the third quarter of 2009 and the second quarter of 2010. Currently there are 2.49 million out of work in the UK.
The CIPD's chief economic adviser John Philpott sees a continued squeeze on pay rises next year as retail price inflation climbs to an expected rate of 3% in 2010. Pay rises "Could be difficult to deliver following a recession during which many private sector employees have experienced pay freezes or pay cuts," Philpott said. He added that a slower than expected recovery or stronger earnings growth would threaten to raise peak unemployment to at least 3 million.
Further, the group said tax and public spending announcements in the December 2009 Pre-Budget Report are unlikely to have any negative impact on the labor market in 2010. It said the impact of planned cuts in public spending and tax increases on jobs - especially the 1% hike in employers' National Insurance Contributions from April 2011 - is expected to be felt after the peak in unemployment.
"However, if employers were to anticipate the rise in NICs when making staffing decisions and/or there was a more immediate cut in public spending - which could be the case if the Conservatives gain power at the General Election due in the first half of 2010 - unemployment might peak at a higher rate than we currently forecast," Philpott said.
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