The Chartered Institute of Personnel & Development (CIPD) has revised downwards its prediction for UK unemployment.

The CIPD now expects unemployment to peak at 8.7% (2.7m) in mid-2012 rather than 9.5% as previously forecast.

CIPD chief economic adviser Dr John Philpott says: “Just as pay freezes and pay cuts protected jobs in the recession, the ongoing pay squeeze is helping our anaemic economy support employment.

“This is clearly preferable to a further very sharp rise in unemployment. But a combination of falling real wages and the likelihood of unemployment well above the pre-recession level for several years to come represents an equivalent amount of labour market distress.

“While the specific labour market symptoms of economic austerity are different than initially expected the ongoing pain is no less severe as the UK workforce continues to suffer an implicit trade-off between jobs and real living standards. In this respect one must hope that the coalition government will not stick rigidly to its existing ‘Plan A’ for fiscal deficit reduction if much weaker economic growth makes the trade-off ever harder to bear.”