The number of people placed in UK permanent jobs fell last month at its fastest rate since the aftermath of the 9/11 attacks in 2001, a report showed on Wednesday, in a sign the economic slowdown is biting hard.

The UK Recruitment and Employment Confederation/KPMG Report on Jobs also showed a marked slowdown in number of people placed in temporary jobs, a slowing in wage inflation and the first fall in temporary vacancies since the survey began in 1997.

"This is yet another worrying set of statistics, confirming that the financial crisis continues to deepen," said Alan Nolan, a director at KPMG. "Particularly concerning is the construction sector which usually shows a strong requirement for temporary labour."

The permanent placement index fell to 44.1 in July, down from 48.2 in June while corresponding vacancies fell to 46.6 from 48.3.

Wage inflation for both permanent and temporary staff fell to a five year low, providing comfort for Bank of England policymakers but highlighting the income squeeze felt by an increasing number of household as wages fail to keep pace with inflation.

The salary index for permanent staff fell to 50.8 in July from 54.1 in June and that for temporary staff fell to 51.1 from 52.4.

"This is a clear indication that the credit crunch has started to reach the jobs market," said Kevin Green, chief executive at the Recruitment and Employment Confederation. "Business confidence is low and as a result, employers are becoming much more cautious."

Employment tends to be a lagging economic indicator as it takes several months for slowing activity to translate into job losses.

Official figures show the number of Britons claiming jobless benefit rose for a fifth month running in June and by its largest amount since the recession of the early 1990s.

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LONDON (Reuters)