THE number of jobs being created next year is forecast to be the lowest in a decade.

The prediction comes because of public sector cuts, and amid speculation that private firms are to recruit fewer staff.

The Chartered Institute of Personnel and Development said in its annual end-of-year report that the employment outlook for next year looked like being "easily the worst" since Labour came to power in 1997.

Employment is expected to increase by only 0.25 per cent next year, much lower than rises recorded in previous years, according to the report.

John Philpott, the institute's chief economist, said: "In the early part of the decade, periods of slower growth in private sector employment were masked by relatively rapid growth in public sector jobs.

"A downward trend in public sector employment in the past two years has, in turn, been more than offset by rising numbers of private sector jobs. But next year will be the first for a decade that the engine of job creation will be spluttering across the economy.

"With higher fuel costs and food prices set to raise the cost of living in the first half of the year, the squeeze on real incomes experienced by many workers this year will continue to bite.

"With jobs also harder to come by, this could reinforce the impact of the economic slowdown, possibly necessitating bigger cuts in interest rates than anticipated to head off the threat of recession."

The report also warned of compulsory redundancies during the next 12 months.

Mr Philpott added: "This will present a challenge to those human resources professionals who have not had to walk the tightrope of laying off large numbers of people while ensuring that people who stay remain committed and motivated.

"Many will be dusting off redundancy manuals in the coming months, to re-discover best practice on trimming staffing levels.

"But, unlike previous bouts of large-scale job shedding, in the early Eighties and early Nineties, which tended to fall relatively heavily on older staff, redundancy practice next year will have to take care not to fall foul of recently- introduced age discrimination legislation."