Net job creation in the UK has almost stopped as employers feel pessimistic about prospects for the economy, the latest quarterly Labour Market Outlook survey by KPMG and the Chartered Institute of Personnel and Development (CIPD) has found.

The balance between the proportion of employers looking to increase staff levels over the next three months and those expecting to cut has fallen from +41 in autumn 2007 to +2 in autumn 2008 – the lowest figure recorded since the survey began in spring 2004, according to the Payroll and Human Resources Newsletter.

Of the 721 employers surveyed, 83 per cent anticipated that Britain’s economic condition would further deteriorate this autumn and only one percent said they thought there would be an improvement.Respondents felt more optimistic about their own organisation though, with only 25 per cent believing that things would get worse.

Even though inflation is running at a 16-year high of 5.2 percent, staff pay excluding bonuses is seen increasing on average by just 3.5 per cent when the next pay review is due, while the expected average increase including bonuses has risen from 3.9 per cent to 4 per cent.

With official UK unemployment data for October due out on Wednesday, CIPD Chief Economist John Philpott sees a gloomy winter ahead:  “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.”

Tell us what impact the downturn has had on you and your business. How has staff morale been affected?

Work and Pensions Secretary James Purnell wants long-term job-seekers to work for their state benefits.

If they have been jobless for a year, they will have to do four weeks of community work with a government-backed private or public body. After two years, they will have to take a full-time job.

People who abuse the system could also be made to work in return for benefits.

Purnell says the welfare system needs a radical overhaul to force people to take more responsibility for themselves.

“One of the reasons Labour lost the trust of the country and the chance of power for 18 years was that we convinced ourselves that you help the poor only by handing out more and more in benefits,” he wrote in the Guardian. “We left individual responsibility - so important to the founders of the welfare state - out of the equation.”

The minister also wants to get one million people off incapacity benefit by 2015.

The Conservatives have welcomed the proposed reforms, but say Labour has stolen some of its key ideas. Shadow Work and Pensions Secretary Chris Grayling said the government has wasted billions of pounds by failing to reform the welfare system sooner.

Do you support the government’s welfare reforms? Should jobseekers be made to work for their benefits?