The national labour market took a turn for the worse in June as employers lacked the confidence to hire staff in the face of the ongoing crisis in the euro zone, a survey showed on Monday.
The labour market has so far been surprisingly resilient and the number of unemployed has even declined despite an economy mired in its second recession in four years.
But the latest Recruitment and Employment Confederation (REC) and KPMG jobs survey showed that the number of permanent placements fell at the sharpest rate in almost three years.
The permanent places index, which measures how many extra workers are being hired, dropped to 46.8 in June, down from 51.0 in the previous month. A reading above 50 signals growth in placements, a number below a decline.
"A decrease in hiring activity means we could see a period of increased unemployment, especially as a new wave of school leavers and graduates will be entering the labour market over the summer," said REC chief executive Kevin Green.
The number of temporary placements declined for the seventh month running while both average salaries for permanent staff and wages for temporary employees remained broadly unchanged.
Bernard Brown, partner and head of business services at KPMG said the survey came as a sobering reminder of the weak economic situation. "The real worry is that the acceleration in the pace of decline suggests this isn't a mere blip," he said.
"If this trend were to continue, there's a very real chance we could hit a 3 million unemployed figure in the UK in the not too distant future," he said.
The number of people without a job on the ILO measure fell by 51,000 in the three months to April to 2.615 million, though the number of those claiming unemployment benefit ticked up in May.
Overall vacancies increased by the smallest amount in five months, though temporary vacancies grew at a marginally faster pace than in May, the KPMG/REC survey showed.
Recruitment consultancies also signalled higher levels of staff availability amongst both permanent and temporary staff.
REC's Green said that the euro zone crisis and other bad news was hurting employer confidence, causing them to take longer to make decisions and to confirm hires.
The survey showed the outlook is not uniformly negative across sectors, Green said. Of those seeking either permanent or temporary contracts, skilled engineers, IT professionals and medical staff are most likely to experience success, while hotel and catering staff are more likely to struggle to find work. (Reporting by Sophie Kirby; editing by Ron Askew)