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Unemployment set to climb

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Unemployment could rise to 2.7 million in 2011, its highest point in 17 years.

The Chartered Institute of Personnel and Development (CIPD) warned in its annual employment barometer that the proportion of people out of work will reach 9 per cent in 2011, an increase of 1.1 per cent on the current level of 7.9 per cent.

According to the CIPD forecasts, 120,000 jobs will go in the public sector and another 80,000 among private firms.

Average earnings are expected to increase by 2 per cent, compared with the retail prices index, which is at 4.7 per cent, and the consumer prices index, which stands at 3.3 per cent.

John Philpott, chief economic adviser to the CIPD, said: “If all goes well and the unexpectedly strong progress made in 2010 is sustained, the jobs market will be able to cope with the impact of the coalition government’s spending cuts and tax increases without any significant rise in unemployment.

“Most workers will feel a squeeze in their real living standards, with pay rises still relatively modest against a backdrop of higher prices for many essential products and services and higher taxes.”

Although Mr Philpott added that “things only have to turn out a bit worse than expected in the wider economy for the jobs situation to weaken, which remains the CIPD’s central forecast”, he went on to say that “this doesn’t mean that we are facing a return to the dire recession days of late 2008 and 2009”.

Nevertheless, the CIPD predicted that 2011 will probably feel like another year in the economic doldrums rather than the start of a return to prosperity.

Mr Philpott concluded: “Even if 2011 turns out to be a jobs-light, rather than jobs-loss or jobs-standstill year, the chances are that the bulk of any new private sector jobs will continue to reflect the experience of 2010, with part-time and temporary jobs in the majority.”