Hiring in the UK’s jobs market failed to bounce back after the budget, according to the latest figures showing permanent and temporary positions fell in December.

A closely-watched survey of the labour market, compiled by KPMG and the Recruitment and Employment Confederation (REC), reported a four-month low for permanent staff placements at the end of the year, another monthly drop in vacancies, and a sharp climb in the availability of workers.

The figures indicate a lingering impact of uncertainty generated by last November’s budget. Business and household confidence measures fell in anticipation of tax rises.

Separate figures from the REC, published last week, showed most businesses do not expect to ramp up hiring significantly this year as they remain weighed down by higher payroll costs in the form of the living wage and the impact of lower thresholds for national insurance contributions.

Neil Carberry, chief executive of the REC, said December’s labour market survey showed a further deterioration on the previous month, when the budget was announced on the 26th.

He said there were some signs of recovery as overall job placements fell at a slower pace than recorded on average in December. This is despite permanent employment falling at the fastest pace since August.

Carberry said: “Making this a better year for hiring will require a focus on building business confidence to invest. With the budget behind us, the government needs to set out a clear path that firms can believe in, from the industrial strategy to pragmatic approaches on the Employment Rights Act, which is worrying many firms.”

• Job listings fall for second month in a row

The unemployment rate hit 5.1 per cent in the fourth quarter of last year — a four-year high — and could hit 5.5 per cent according to economists surveyed by The Times. That would be the worst figure in more than a decade.

Despite a slowing jobs market and stagnant economic growth, most economists and traders do not expect the Bank of England to carry out more than two interest rate cuts this year. Lower borrowing costs help reduce the costs of investment and hiring for firms, and stimulate the economy by encouraging spending.

The Bank’s latest survey of decision-makers found businesses expected to reduce headcount this year, and wage settlements are likely to fall marginally from 3.8 per cent to 3.7 per cent.

Rate-setters are balancing the dangers of a slowing jobs market with the prospect of inflation remaining high. The REC’s survey said the rate of pay for permanent employees accelerated at the fastest pace since May — suggesting there are still sources of strong inflation in the economy.

• Recruitment stalls amid rising staff costs

The Bank wants average wages to fall to around 2-3 per cent to keep inflation contained at its target rate of 2 per cent.

The average rate of pay for temporary workers also rose in December after being stagnant in the previous two months. Overall wage growth remains “comfortably below the historical average”, the survey said. The Midlands was the best-performing region in England, and the only one to record an increase in temporary staff placements. Hiring fell in London and the north and south of England.

Data from Morgan McKinley, a recruitment firm, said vacancies in the financial services sector in London fell 16 per cent in the final quarter, but total jobs were still up 16 per cent on the year.