CONCERNS over swingeing public sector job cuts threaten to overshadow another expected fall in UK unemployment when official figures are published today.
Experts predict the latest data from the Office for National Statistics (ONS) will show a further decline in the number of jobless Britons.
But economists fear the UK’s labour market will not be strong enough to support the mammoth public sector job losses looming under next month’s spending review.
The ONS figures are expected to show unemployment fell by about 35,000 in the three months to July.
The largest rise in employment for more than 21 years helped drive unemployment down by 49,000 in the three months to June.
However, this is largely because record numbers are being forced into part-time work after failing to secure full-time jobs.
There are also increasing worries that the jobs market, which traditionally lags behind the wider economy, is about to show a turn for the worse.
Vicky Redwood of Capital Economics said "cracks are appearing" in some recent surveys. She said the quarterly Employment Outlook Survey from Manpower signalled that firms have few intentions of hiring more workers.
The latest jobs report from the Recruitment and Employment Confederation (REC) and KPMG also painted a downbeat picture, with a poor reading on permanent staff placements for the fifth straight month.
The Government hopes the economic recovery will see the private sector compensate for the 600,000 job losses it expects to make over the next five years.
But Ms Redwood said: "The downturn in some of the timeliest indicators of employment clearly casts further doubt over the ability of the private sector to keep the labour market afloat once the public sector job cuts start."
She added that private sector employment would need to grow by 0.6% a year just to stop overall job levels falling.
"With productivity still unusually low and firms’ confidence in economic recovery fragile, we doubt that the private sector is up to the job," she said.
This month’s administration of social housing firm Connaught - which has caused 1,100 redundancies so far - has also highlighted the knock-on effect of the spending cuts on the private sector.
Howard Archer, chief economist at IHS Global Insight, expects unemployment to start rising again by the end of the year and throughout 2011, to peak at about 2.85 million in the first half of 2012.
The ONS figures will also be watched closely for further news on trends among older workers.
The ONS revealed last month that record numbers of hard-up over-65s are going back to work.
However, its data also showed more than a fifth of the long-term unemployed - 169,000 - were aged over 50, leading to warnings older jobseekers face a spiral of unemployment.