Job creation is at a virtual standstill and there are extremely gloomy future prospects for the economy, according to a new survey.

The Labour Market Outlook (LMO) survey, from the Chartered Institute of Personnel and Development (CIPD) and KPMG and carried out by Ipsos MORI, found that the balance between the proportion of employers expecting to increase staff levels in the next quarter and those expecting to reduce headcount has plunged from +41 in Autumn 2007 to just +2 in Autumn 2008. This is the lowest figure on record since the LMO survey began in spring 2004.

Most employers (83%) think economic conditions will deteriorate this autumn, with only 1% expecting things to get better – though respondents were somewhat more optimistic about the outlook for their own organisation, only a quarter expected conditions to worsen.

Elsewhere, a quarterly survey, produced by the Confederation of British Industry (CBI), found 13% of small and medium-sized businesses reduced their workforce in the three months to October, the biggest quarterly fall in five years, while 27% claimed they would slash further jobs in the next quarter.

Commenting on the latest LMO findings John Philpott, CIPD chief economist, said: “The year since the impact of the credit crunch was first felt has seen the UK labour market move from a state of buoyancy to one of stagnation. We are now at the start of a period of contraction, with jobs being lost, new jobs hard to come by and, as this week’ official statistics are set to confirm, unemployment on an ever sharper upward rise. With pay increases at best modest for those still in work the harsh chill of recession will make this the toughest winter for UK households for almost two decades.”