Hiring by business will outweigh public cuts

PUBLIC sector job losses are unlikely to cause higher unemployment between now and 2017, the government said yesterday, as it expects hiring by businesses to outweigh cuts.

The private sector is expected to create 1.7m new jobs by 2017, according to the Office for Budget Responsibility (OBR), enough to mop up the 710,000 job losses in public agencies.

Despite the rise in expected public sector redundancies from the 400,000 previously forecast, the OBR expects the labour market to stay steady.

“The indicators suggest little evidence of a permanent structural deterioration in the labour market and we have maintained our long-term... assumption of 5.35 per cent,” it said.

It said the unemployment rate should peak at 8.7 per cent by the end of next year, rising to 2.8m people unemployed from 2.6m people today.

The Chartered Institute of Personnel and Development backed the OBR’s view.

“This is good news in that it suggests that unemployment can fall quite rapidly once the economy returns to a strong rate of growth,” said CIPD chief economic adviser John Philpott.