More than half a million jobs will be axed in the coming 12 months, making 2009 the worst year for job losses for two decades, according to forecasts to be published today.
Just a week after one cabinet minister warned The Independent of an impending unemployment "bloodbath", the Chartered Institute of Personnel and Development (CIPD) is predicting that as many as 600,000 staff face redundancy in 2009 alone, taking the unemployment total to 2.8 million.
Next year's forecast—combined with the number of positions already lost and those expected to go in 2010—adds up to a grim total, according to John Philpott, the CIPD's chief economist. "The period from mid-2008 until the end of 2009 will witness the loss of around three quarters of a million jobs," he said. "Assuming the economy bottoms out in the second half of 2009, job losses are likely to continue into 2010, in all probability taking the final toll of lost jobs to around 1 million."
The cull will start immediately, with staff cuts expected to jump sharply in the next few months as employers take stock of the economic outlook and go ahead with plans for lay-offs that were put off until after Christmas. "The period between New Year and Easter is likely to be the worst for redundancies since 1991," Mr Philpott said.
The employment forecasts are just the latest gloomy data pushing down economic confidence. Consumer inflation expectations for 2009 are already depressed thanks to cut-throat discounting on the high street and lower prices at petrol pumps, according to Lloyds TSB's Consumer Barometer, also published today. A record-low number of consumers—just 44 per cent of those surveyed—think that prices will rise next year. As recently as July, 90 per cent of respondents thought prices would go up as soaring food and energy costs took their toll.
Trevor Williams, chief economist at Lloyds TSB Corporate Markets, said: "The aggressive pre-Christmas discounting has encouraged consumers to set their price expectations low for the year ahead. This is a dramatic turn of events from the summer, when petrol prices were at their peak and the majority of consumers felt prices would continue to rise."
Expectations of lower inflation have done little to increase confidence that interest rates will also fall. The Bank of England has already slashed the base rate by 3 percentage points since September, as it switched focus from combating rising price expectations to battling recession. Financial markets have also priced in further cuts, starting as early as next month, with many economists predicting base rates close to zero by the summer. But, according to the Consumer Barometer, some 72 per cent of consumers still expect borrowing costs to rise or stay the same over the next year, casting doubt on shoppers' willingness to spend and ease the economic downturn.
"Low price expectations do not necessarily mean consumers will increase spending in 2009," Mr Williams said. "The expectation that interest rates are set to rise may mean that consumers don't have the confidence to spend."
Taken together, rising unemployment, falling consumer confidence and depressed inflation expectations substantiate last week's pessimistic macroeconomic forecasts from a leading think tank. Gross domestic product (GDP) is expected to contract by 2.9 per cent, in real terms, next year—the biggest single annual fall since the Second World War, the Centre for Economics and Business Research (CEBR) said.
Household expenditure will drop by 1.8 per cent, but the big problem is collapsing investment. The CEBR is predicting a 15 per cent drop as business scales back spending and the banking sector credit squeeze continues. Charles Davis, an economist at the CEBR, said: "The UK economy deteriorated significantly in the second half of 2008, but 2009 is where we are likely to see the real economic pain."