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Employers might still be hiring and there may be few signs of a rise in redundancies, but early indications by the Chartered Institute of Personnel and Development suggest that the credit crunch is beginning to take its toll on employment.

According to the latest official labour market statistics published by the Office for National Statistics, there has been a decrease in the growth rate of employment compared with previous quarters.

John Philpott, chief economist at the CIPD, said: "The rate of growth in employment is much slower than in recent quarters and some sectors are showing obvious signs of strain. Combined with continued strong growth in the number of people entering the labour market the economy is now generating too few jobs to prevent the dole queue from starting to lengthen."

Dr Philpott added that the finance and business services sector still remains in the eye of the storm, shedding 20,000 jobs in the first quarter. He said: "All in all, while some might argue that signs of slower growth in jobs and rising unemployment strengthen the case for a cut in the official bank rate, the latest labour market figures remain strong enough to suggest otherwise, especially given a slight rise in the rate of growth in regular pay.

"Indeed, with inflation set to rise further above target, the probability has increased that bank rate may have to increase. Though perhaps necessary, this would serve to exacerbate the jobs slowdown and increase the risk of a big rise in unemployment."