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Ian Brinkley
Economic Advisor
Ian Brinkley

Christmas surge followed by Spring slump?

Authors: Ian Brinkley Ian Brinkley

16 November 2010

The CIPD’s latest recruitment survey finds private sector employers reporting a pre-Christmas surge in job creation, while public sector organisations are starting to shed jobs in increasing numbers. The Institute thinks the first may balance the second.

However, the pre-Christmas surge in employment is typically followed by a Spring slump as firms shed surplus labour. Nor do all sectors hire more workers in the run up to Christmas – industries such as construction may lay off some workers because of bad weather.

How big might the surge and slump be? Over the pre-recession decade employee employment has risen in most pre-Christmas periods by between 150,000 and 250,000 and then fallen back by roughly the same amount in the ensuing three months. This is shown in the table below.

Not all of these changes are due to seasonal factors. For example, the exceptionally large increase pre-Christmas 2004 and the modest fall in the three months after was because the economy was experiencing very strong underlying job growth once seasonal factors had been taken into account. For the opposite reasons, the post Christmas fall between December 2008 and March 2009 was very large because the economy was entering recession.

How strong the pre-Christmas hiring might be will depend on how much employers anticipate consumers will be prepared to spend. If they assume that demand will be held back by higher unemployment, reduced borrowing, and a squeeze on real wages (after allowing for inflation) then the past decade may not be a good guide to the magnitude of the surge and the slump. But in the years after the 1990s recession, the Christmas Surge and Spring Slump were very similar to those shown in the table. If history repeats itself, we will see a similar pre-Christmas increase this year.

However, comparing the Christmas surge in private sector jobs with possible losses in the public sector is not really comparing like with like. Public sector job losses are structural – unlikely to be reversed for the foreseeable future. To answer the bigger question of whether the private sector can absorb public sector falls in employment we must ignore both the Christmas Surge and the Spring Slump. The figure to focus on in the official statistics – the next set to be published on 17 November - is underlying employment growth in the private sector after making allowance for seasonal factors.