It's 'make or break time' for UK employers who have so far managed to hold off from making job cuts, according to the Chartered Institute of Personnel and Development (CIPD).
The group found many employers had not cut staff for fear of losing skills, with a third of businesses keeping on more people than they needed.
Its Labour Market Outlook survey of 1,000 firms found two thirds of employers said they would have to cut jobs if the economy didn't grow in the next year
The CIPD's report follows a run of positive unemployment figures.
The Office for National Statistics reported that unemployment fell to 2.58m in the three months to May, down from 2.8m in November last year.
Report author, Gerwyn Davies, said recent falls in unemployment suggested that the labour market was on a sound footing, but a closer examination revealed many employers were holding on to more staff than required by the current level of demand.
"This is a make or break moment for employers - unless growth picks up many will find that they cannot hold on to some workers any longer," he said.
"The tenacity with which employers are hanging on to skilled labour is a reflection of the high value they place on it and the damage they fear will be done to their businesses if they are forced to start making more redundancies."
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