Job creation highest in ten months

Recruiters, led by the private sector, filled permanent vacancies at the fastest pace in 10 months in February while wage inflation eased to a three-month low, a survey showed.

Research for the Recruitment and Employment Confederation and KPMG also showed hiring of temporary staff rose at its sharpest rate since May 2007, offering hope the economy might bounce back from the shock contraction it suffered late last year.

The permanent placements index – a measure of how many firms are hiring extra workers compared to the previous month – rose to 62.7 in February from an upwardly revised 58.2 in January. It has been above the 50 level, which separates growth from contraction, for 19 months.

The wage inflation index for permanent staff fell to a three-month low of 53.7, down from 54.1 in January, and was below the long-run average.

That is likely to cheer the Bank of England as it faces increasing pressure to bring consumer price inflation down from four per cent, double its target. Policymakers are keen to avoid the risk of a wage-price spiral but are also wary of raising interest rates against a fragile economic backdrop.

Britain's economy suffered a surprise 0.6 percent contraction in the final quarter of 2010 and the number of Britons claiming unemployment benefit rose in January for the first time in four months.

REC said that, in February, increased hiring by private companies stood in sharp contrast to a weak performance in the public sector.

The government is cutting £81bn from spending, around a fifth of most departmental budgets, and raising taxes to eliminate a record deficit. Its budget watchdog expects 330,000 public jobs to be lost by 2014/15.

"The UK now has a two-speed labour market," said REC chief executive Kevin Green. "The private sector continues to hire in increasing numbers while the public sector is shedding jobs."