Calls for the Bank of England to slash interest rates intensified last night as the economic downturn prompted companies to cut recruitment at a record pace.

The number of people being hired fell for the seventh month in a row in October, according to the monthly Report on Jobs from the Recruitment and Employment Confederation and KPMG. More than half of companies hired fewer people in October than in September, and only 15 per cent took on more permanent staff, pushing the monthly index of permanent staff placements down to 33.4 - the lowest since the series began in 1997. Any figure under 50 indicates that demand for new staff is declining.

The index of temporary staff appointments also fell to a record low, while the number of vacancies declined at a record pace.

Mike Stevens, partner and head of business services with KPMG, said that the jobs market was set to deteriorate further as recession gripped the country. The European Commission said this week that it expected nearly half a million Britons to lose their jobs in the next year as unemployment surged to 2.25million.

As fears grow that consumer spending, which has been the engine of the economy for more than a decade, could fall sharply, business organisations called for the Bank of England to make a large interest rate cut tomorrow. PricewaterhouseCoopers said it believed that consumer spending would fall by 0.5 per cent next year - the first decline since 1991. It blamed high debt levels, tighter credit conditions, falling house prices and rising unemployment. Spending was expected to rise by 1.75 per cent this year.

The CBI said a full one-point cut in interest rates was necessary, while the TUC said the Bank should cut rates by 1.5 per cent to 3 per cent. Economists are forecasting a more modest half-point cut, but last night markets were pricing in a decrease of 75 basis points.

The Bank, which made an emergency half-point cut last month,has never reduced interest rates by more than half a point since it was granted independence in 1997.New workers, already struggling to secure a job, were dealt a further blow as the confederation report, prepared by Markit Economics, said that salaries for new recruits fell at their sharpest rate in nine years.

The steepest decline in recruitment took place among accountancy and financial firms as the financial crisis continued to take its toll, but all sectors except nursing and medical care experienced a dramatic slowdown in hiring new staff.

A separate report highlighted difficulties faced by construction companies and housebuilders, badly affected by tumbling house prices and tight mortgage lending. The Chartered Institute of Purchasing and Supply/Markit construction index slid to 35.1 from 38.8 in September, the eighth consecutive monthly fall and the lowest level since the records began in 1997.

However, there was a glimmer of hope as consumer confidence edged up for the first time since January on the back of the multibillion-pound bank bailout. The Nationwide consumer confidence index rose to 54 in October, up from a series low of 51 in September. However, 56 per cent of consumers are still expecting jobs to shrink over the next six months, Nationwide said.

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