Marvin OnumonuUK employment figures stayed near their lowest point in over a decade, according to the latest BDO Business Trends report.
The employment index dropped again in June to 94.22, down from 94.32 in May and staying close to a 13-year low.
Payrolled employment fell by 109,000 in May, nearly double the drop seen in April.
BDO said firms were holding back on recruitment due to higher costs, especially the rise in national insurance contributions that came in April.
Business confidence stayed low, with BDO’s optimism index falling to 91.58 from 92.30 in May.
The report found cost pressures, especially around labour, continued to hit margins.
The prospect of further tax rises in the autumn also weighed on sentiment.
The BDO output index rose for a second month, up from 97.16 in May to 97.51 at the end of June.
Growth was mainly down to the services sector, where activity increased to 97.75.
Scott Knight, head of growth at BDO, said: “We’re seeing early signs of recovery in business output, largely down to the services sector who have buoyed the economy for a second month in a row.
“But, as we all know, we can’t rely on good weather forever. Businesses are treading carefully in wait-and-see mode when they need to be bold in their recruitment and investment.
“Without lower labour costs, clear signalling from government and a stable policy environment, growth will remain subdued.”
