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UK jobless rate hits joint lowest since 1975; markets await US interest rate decision - live UK jobless rate hits joint lowest since 1975; markets await US interest rate decision - live
(35 minutes later)
3.23pm GMT
15:23
Jane Sydenham, investment director of Rathbones Investment Management, says that because a Fed rate hike at today’s meeting has already been priced in, the impact on markets is likely to be small.
After flag waving for more than a year, it would be surprising if Yellen didn’t take the opportunity to raise rates today, especially in light of all the positive data. Facing such a known unknown, markets have almost certainly priced this in and the impact is likely to be minimal.
What investors need to be more mindful of is that this may be just the first of three possible rate rises this calendar year, but other rises will be dependent on continuing strength in economic data and an inflation rate that remains at a manageable level.
3.13pm GMT
15:13
So much for Janet Yellen's suggestion that the Fed could run the economy "a little hot" to undo damage of recession https://t.co/dKbs3Txnpl pic.twitter.com/bJ2DGmn9YR
3.10pm GMT
15:10
Paul Sirani, chief market analyst at brokerage Xtrade, believes that tonight could mark the beginning of a series of Fed rate hikes.
The way the US economy is moving at the moment, we can see the Fed raising interest rates at least three, if not four, times this year. Although, if Donald Trump gets his way then it will almost certainly be the latter.
Business in the US is arguably strong enough to dust off rates up to 2% this year, but Janet Yellen will be wary of moving too fast with plenty of political uncertainty still circling in Europe.
And the Bank of England could soon follow suit.
As soon as the Fed moves today, the BoE may not be too far behind. Raising rates amidst the uncertainty of Brexit is of course risky, but with inflation soaring an April rate hike looks about right.
2.51pm GMT2.51pm GMT
14:5114:51
Sam Fleming of the FT has written a preview of today’s Fed meeting.Sam Fleming of the FT has written a preview of today’s Fed meeting.
Here’s a flavour:Here’s a flavour:
It would now be a significant shock if the US central bank did not lift the target range for the federal funds rate by another quarter point from the current 0.5 per cent to 0.75 per cent.It would now be a significant shock if the US central bank did not lift the target range for the federal funds rate by another quarter point from the current 0.5 per cent to 0.75 per cent.
The chances of a move were seen by markets at around 95 per cent going into the meeting, according to a CME Group analysis of futures prices. So the issue for investors is judging whether the next move could come as soon as June and whether there is the possibility of four increases this year, rather than the three predicted in December.The chances of a move were seen by markets at around 95 per cent going into the meeting, according to a CME Group analysis of futures prices. So the issue for investors is judging whether the next move could come as soon as June and whether there is the possibility of four increases this year, rather than the three predicted in December.
Either way, the Fed is still likely to characterise its rate-raising plans as “gradual”.Either way, the Fed is still likely to characterise its rate-raising plans as “gradual”.
What to watch at the Fed meeting https://t.co/CveHqW9l6lWhat to watch at the Fed meeting https://t.co/CveHqW9l6l
1.37pm GMT1.37pm GMT
13:3713:37
Wall Street opens higherWall Street opens higher
Over in New York, shares are rising at the start of trading.Over in New York, shares are rising at the start of trading.
The Dow Jones industrial average, the S&P 500 and the Nasdaq are all showing modest gains, as investors get ready for the Federal Reserve meeting.The Dow Jones industrial average, the S&P 500 and the Nasdaq are all showing modest gains, as investors get ready for the Federal Reserve meeting.
Paul Sirani, chief market analyst at Xtrade, says the rise in US inflation (see earlier post) means a rate rise is even more likely today:Paul Sirani, chief market analyst at Xtrade, says the rise in US inflation (see earlier post) means a rate rise is even more likely today:
“Today’s figures show inflation climbed to a five-year high for the second consecutive month, reinforcing strong expectations of a Fed interest rate hike on Wednesday.“Today’s figures show inflation climbed to a five-year high for the second consecutive month, reinforcing strong expectations of a Fed interest rate hike on Wednesday.
“Under current levels of inflationary pressures, Janet Yellen has little choice but to pencil in a first rate when the Fed convenes later today.“Under current levels of inflationary pressures, Janet Yellen has little choice but to pencil in a first rate when the Fed convenes later today.
“Despite uncertainty surrounding President Trump’s policies, it remains a question of how many hikes we will see this year, with investors fretting over the prospect of four.”“Despite uncertainty surrounding President Trump’s policies, it remains a question of how many hikes we will see this year, with investors fretting over the prospect of four.”
1.00pm GMT1.00pm GMT
13:0013:00
US inflation hits highest since 2012 ahead of Fed decisionUS inflation hits highest since 2012 ahead of Fed decision
Just in: America’s inflation rate has hit its highest level since March 2012, underlining why US interest rates are likely to rise later today.Just in: America’s inflation rate has hit its highest level since March 2012, underlining why US interest rates are likely to rise later today.
The US consumer prices index rose by 2.7% year-on-year in February, up from 2.5% in January. On a monthly basis, prices crept up by 0.1%.The US consumer prices index rose by 2.7% year-on-year in February, up from 2.5% in January. On a monthly basis, prices crept up by 0.1%.
Nothing here to scare the Federal Reserve away from raising interest rates in five hours time, I suspect.Nothing here to scare the Federal Reserve away from raising interest rates in five hours time, I suspect.
US Feb CPI no game changer, Citi says. CPI surprised a bit to the upside on a MoM basis, BUT was inline otherwise, including core data. pic.twitter.com/VwpIv4KTXPUS Feb CPI no game changer, Citi says. CPI surprised a bit to the upside on a MoM basis, BUT was inline otherwise, including core data. pic.twitter.com/VwpIv4KTXP
12.46pm GMT12.46pm GMT
12:4612:46
And here’s economics editor Larry Elliott, on the worrying slowdown in wage growth:And here’s economics editor Larry Elliott, on the worrying slowdown in wage growth:
Average earnings in the three months to January were 2.3% higher than a year earlier: in the three months to December 2016 they rose at an annual rate of 2.6%.Average earnings in the three months to January were 2.3% higher than a year earlier: in the three months to December 2016 they rose at an annual rate of 2.6%.
These figures speak volumes about the modern labour market and in particular how the balance of power has shifted in the past four decades. Even when jobs are relatively plentiful and inflation is picking up, workers are unwilling or unable to press for higher pay.These figures speak volumes about the modern labour market and in particular how the balance of power has shifted in the past four decades. Even when jobs are relatively plentiful and inflation is picking up, workers are unwilling or unable to press for higher pay.
The reasons for this transformation is obvious: deindustrialisation and the growth of employment in the non-unionised service sector; curbs on the power of trade unions; an increase in labour supply. In addition, the one area where trade union density remains high – the public sector – is subject to a 1% pay cap.The reasons for this transformation is obvious: deindustrialisation and the growth of employment in the non-unionised service sector; curbs on the power of trade unions; an increase in labour supply. In addition, the one area where trade union density remains high – the public sector – is subject to a 1% pay cap.
More here:More here:
12.32pm GMT12.32pm GMT
12:3212:32
Here’s Angela Monaghan’s take on this morning’s UK unemployment report:Here’s Angela Monaghan’s take on this morning’s UK unemployment report:
Britain’s unemployment rate has fallen to its joint lowest level since 1975 but wage growth also slowed in a sign of the fresh squeeze in living standards facing UK households.Britain’s unemployment rate has fallen to its joint lowest level since 1975 but wage growth also slowed in a sign of the fresh squeeze in living standards facing UK households.
The jobless rate fell to 4.7% in the three months to January from 4.8% in the previous three months, matching the rate last seen in 2005. It was last lower in the three months to August 1975, when it was 4.6% according to the Office for National Statistics.The jobless rate fell to 4.7% in the three months to January from 4.8% in the previous three months, matching the rate last seen in 2005. It was last lower in the three months to August 1975, when it was 4.6% according to the Office for National Statistics.
Despite the fall, total pay including bonuses slowed sharply from 2.6% to 2.2%, the lowest since early 2016. Real pay growth – adjusted for inflation – was just 0.7%, the weakest in more than two years.Despite the fall, total pay including bonuses slowed sharply from 2.6% to 2.2%, the lowest since early 2016. Real pay growth – adjusted for inflation – was just 0.7%, the weakest in more than two years.
The employment rate was unchanged at 74.6%, the highest since records began in 1971....The employment rate was unchanged at 74.6%, the highest since records began in 1971....
More here:More here:
11.59am GMT11.59am GMT
11:5911:59
Some reaction to Philip Hammond’s handbrake turn on the NICs increase:Some reaction to Philip Hammond’s handbrake turn on the NICs increase:
Overheard in newsroom: "Good news for Barnier and his team: if you can roll over the govt on NICs then wait til the Brexit negotiations."Overheard in newsroom: "Good news for Barnier and his team: if you can roll over the govt on NICs then wait til the Brexit negotiations."
Absolutely no chance the UK government will buckle under pressure from right-wing press on anything Brexit related.Absolutely no chance the UK government will buckle under pressure from right-wing press on anything Brexit related.
I bet Philip Hammond doesn't find his joke about Lamont being sacked 10 weeks after delivering a "last Spring budget" so funny anymoreI bet Philip Hammond doesn't find his joke about Lamont being sacked 10 weeks after delivering a "last Spring budget" so funny anymore
No opposition, new team in govt, charging to Brexit, still found a (home-grown) banana-skin to fall over on. Good Job! https://t.co/5nP4ZExAayNo opposition, new team in govt, charging to Brexit, still found a (home-grown) banana-skin to fall over on. Good Job! https://t.co/5nP4ZExAay
11.51am GMT11.51am GMT
11:5111:51
I wonder if Philip Hammond is now regretting making that joke about his predecessor, Norman Lamont, getting sacked.....I wonder if Philip Hammond is now regretting making that joke about his predecessor, Norman Lamont, getting sacked.....
Here’s what he said during last week’s gag-filled Budget speech:Here’s what he said during last week’s gag-filled Budget speech:
The Treasury has helpfully reminded me that I am not the first Chancellor to announce the “last spring Budget”The Treasury has helpfully reminded me that I am not the first Chancellor to announce the “last spring Budget”
Twenty four-years ago Norman Lamont also presented what was billed then as “the last Spring Budget”.Twenty four-years ago Norman Lamont also presented what was billed then as “the last Spring Budget”.
He reported on an economy that was growing faster than any other in the G7, and he committed to continued restraint in public spending.He reported on an economy that was growing faster than any other in the G7, and he committed to continued restraint in public spending.
The then Prime Minister described it as the “right budget, at the right time, from the right Chancellor”.The then Prime Minister described it as the “right budget, at the right time, from the right Chancellor”.
What they failed to remind me was…ten weeks later, he was sacked!What they failed to remind me was…ten weeks later, he was sacked!
So wish me luck!So wish me luck!
Good luck Philip!Good luck Philip!
UpdatedUpdated
at 11.56am GMTat 11.56am GMT
11.47am GMT11.47am GMT
11:4711:47
Government ditches plans to raise national insurance rates for self-employedGovernment ditches plans to raise national insurance rates for self-employed
Oh my goodness! Philip Hammond, the UK chancellor, has just ditched his plan to raise tax rates on the self-employed.Oh my goodness! Philip Hammond, the UK chancellor, has just ditched his plan to raise tax rates on the self-employed.
In a very embarrassing u-turn, Hammond has decided to abandon his proposed changes to Class Four National Insurance Contributions, announced in last week’s budget.In a very embarrassing u-turn, Hammond has decided to abandon his proposed changes to Class Four National Insurance Contributions, announced in last week’s budget.
This follows a stream of protests from Conservative MPs, especially as the party had promised NOT to raise national insurance rates in its manifesto for the 2015 electionThis follows a stream of protests from Conservative MPs, especially as the party had promised NOT to raise national insurance rates in its manifesto for the 2015 election
Hammond is dropping the National Insurance tax rise! Announces in letter to Andrew Tyrie, chair of the Treasury select committeeHammond is dropping the National Insurance tax rise! Announces in letter to Andrew Tyrie, chair of the Treasury select committee
Here’s the key section from Hammond’s letter announcing the change:Here’s the key section from Hammond’s letter announcing the change:
Hammond is due to speak to MPs about this change of heart, around 2.30pm.Hammond is due to speak to MPs about this change of heart, around 2.30pm.
Our Politics Live blog will be tracking it:Our Politics Live blog will be tracking it:
11.33am GMT11.33am GMT
11:3311:33
Today’s report also shows that the UK employment total rose by 92,000 in the last three months, to a new record high of 31.854m.Today’s report also shows that the UK employment total rose by 92,000 in the last three months, to a new record high of 31.854m.
Employment Minister Damian Hinds says it’s a good sign:Employment Minister Damian Hinds says it’s a good sign:
“I’m delighted by another set of record-breaking figures showing more people in work than ever before and unemployment falling to its lowest in 12 years.“I’m delighted by another set of record-breaking figures showing more people in work than ever before and unemployment falling to its lowest in 12 years.
“Employment is up, wages are up and there are more people working full-time. This is good news for hard-working families across the UK as we continue to build a country that works for everyone.“Employment is up, wages are up and there are more people working full-time. This is good news for hard-working families across the UK as we continue to build a country that works for everyone.
“But we have more to do, which is why we’re pressing ahead with our welfare reforms to ensure that it always pays to be in work.”“But we have more to do, which is why we’re pressing ahead with our welfare reforms to ensure that it always pays to be in work.”
11.03am GMT11.03am GMT
11:0311:03
The recovery in Britain’s jobs sector in recent years has not been shared equally across the country.The recovery in Britain’s jobs sector in recent years has not been shared equally across the country.
This chart, from the Resolution Foundation, shows how some parts of the country have enjoyed strong growth creation, while others are lagging.This chart, from the Resolution Foundation, shows how some parts of the country have enjoyed strong growth creation, while others are lagging.
10.43am GMT10.43am GMT
10:4310:43
The drop in real wage growth, to just 0.8%, is “terrible news”, warns the Resolution Foundation.The drop in real wage growth, to just 0.8%, is “terrible news”, warns the Resolution Foundation.
Laura Gardiner, their senior policy analyst, fears that Britain’s “short-lived pay recovery” could end soon.Laura Gardiner, their senior policy analyst, fears that Britain’s “short-lived pay recovery” could end soon.
Weak pay rises and rising inflation mean that a fresh squeeze is due later this year, and has already begun for some workers, especially in the public sector.Weak pay rises and rising inflation mean that a fresh squeeze is due later this year, and has already begun for some workers, especially in the public sector.
“The incredibly poor outlook for pay has pushed a return to pre-crash earnings back well into the next parliament, making the 2010s the weakest decade for pay growth since the Napoleonic wars.“The incredibly poor outlook for pay has pushed a return to pre-crash earnings back well into the next parliament, making the 2010s the weakest decade for pay growth since the Napoleonic wars.
UpdatedUpdated
at 10.49am GMTat 10.49am GMT
10.35am GMT10.35am GMT
10:3510:35
Ian Kernohan, Economist at Royal London Asset Management, is also concerned by the weak pay growth.Ian Kernohan, Economist at Royal London Asset Management, is also concerned by the weak pay growth.
He believes it will prevent the Bank of England raising interest rates this year.He believes it will prevent the Bank of England raising interest rates this year.
Regular pay growth was disappointing at just 2.3%, and with inflation rising, a squeeze on real household incomes is a major reason why we expect economic growth to slow this year. We expect the MPC to keep interest rates on hold until 2019 at the earliest.”Regular pay growth was disappointing at just 2.3%, and with inflation rising, a squeeze on real household incomes is a major reason why we expect economic growth to slow this year. We expect the MPC to keep interest rates on hold until 2019 at the earliest.”
10.31am GMT10.31am GMT
10:3110:31
A couple more charts from today’s report:A couple more charts from today’s report:
10.25am GMT10.25am GMT
10:2510:25
UK real wage growth falls againUK real wage growth falls again
The drop in average earnings (ex bonuses) to 2.3% per year in November-January means that real wage growth has dropped again.The drop in average earnings (ex bonuses) to 2.3% per year in November-January means that real wage growth has dropped again.
UK inflation was 1.2% in November, 1.6% in December, and a blistering 1.8% in January. So real wage growth was actually only around 0.8%.UK inflation was 1.2% in November, 1.6% in December, and a blistering 1.8% in January. So real wage growth was actually only around 0.8%.
Inflation is likely to have jumped again in February (we find out next week)Inflation is likely to have jumped again in February (we find out next week)
John Hawksworth, chief economist at PwC, fears that inflation could overtake wage growth this year:John Hawksworth, chief economist at PwC, fears that inflation could overtake wage growth this year:
“UK jobs growth was more robust than expected in the three months to January, rising by over 90,000 compared to the previous three months. The momentum of jobs growth actually looks somewhat stronger now than a few months ago, while the unemployment rate fell to 4.7%, its lowest level since 1975. For the moment, the jobs market remains in fine fettle.“UK jobs growth was more robust than expected in the three months to January, rising by over 90,000 compared to the previous three months. The momentum of jobs growth actually looks somewhat stronger now than a few months ago, while the unemployment rate fell to 4.7%, its lowest level since 1975. For the moment, the jobs market remains in fine fettle.
“There was less good news on average earnings growth, which fell back to just 2.2% in the three months to January. With consumer price inflation already up to 1.8% in January and set to rise further over the coming months, real earnings growth could be back in negative territory by the end of 2017. This is likely to dampen consumer spending, which could eventually feed through into slower jobs growth as well.”“There was less good news on average earnings growth, which fell back to just 2.2% in the three months to January. With consumer price inflation already up to 1.8% in January and set to rise further over the coming months, real earnings growth could be back in negative territory by the end of 2017. This is likely to dampen consumer spending, which could eventually feed through into slower jobs growth as well.”
UpdatedUpdated
at 10.45am GMTat 10.45am GMT
10.14am GMT10.14am GMT
10:1410:14
Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), says the UK labour market seems to be in good shape:Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), says the UK labour market seems to be in good shape:
“The UK’s jobs market is going from strength to strength, with the number of people in work continuing to rise and unemployment also falling.“The UK’s jobs market is going from strength to strength, with the number of people in work continuing to rise and unemployment also falling.
But Thiru also expects unemployment to rise in the months ahead, while wage growth stalls:But Thiru also expects unemployment to rise in the months ahead, while wage growth stalls:
“UK labour market conditions may cool over the next few years as the expected slowdown in growth and the rising burden of upfront business costs stifle firms’ hiring intentions. That said, we expect that the UK unemployment rate will reach a peak of 5.3% next year, still some way below the historical average.“UK labour market conditions may cool over the next few years as the expected slowdown in growth and the rising burden of upfront business costs stifle firms’ hiring intentions. That said, we expect that the UK unemployment rate will reach a peak of 5.3% next year, still some way below the historical average.
“However, average pay growth continues to slow, and it appears increasingly likely that inflation will outstrip earnings growth in the coming months, which will put further pressure on consumer’s spending power.“However, average pay growth continues to slow, and it appears increasingly likely that inflation will outstrip earnings growth in the coming months, which will put further pressure on consumer’s spending power.
10.04am GMT10.04am GMT
10:0410:04
Self-employment total jumpsSelf-employment total jumps
The number of self-employed people in the UK is rising faster than the number of employed workers, today’s report shows.The number of self-employed people in the UK is rising faster than the number of employed workers, today’s report shows.
The ONS reports that in the last year:The ONS reports that in the last year:
employees increased by 144,000 to 26.83 million (84.2% of all people in work)employees increased by 144,000 to 26.83 million (84.2% of all people in work)
self-employed people increased by 148,000 to 4.80 million (15.1% of all people in work)self-employed people increased by 148,000 to 4.80 million (15.1% of all people in work)
Professor Geraint Johnes, Director of Research at Lancaster University’s Work Foundation, says the rise in ‘gig economy’ jobs (such as delivery drivers) is responsible:Professor Geraint Johnes, Director of Research at Lancaster University’s Work Foundation, says the rise in ‘gig economy’ jobs (such as delivery drivers) is responsible:
“The latest labour market statistics show a large rise in employment and a fall in unemployment (with the rate down to 4.7%). The big gain has come from full-time self-employment - a rise of some 94000 on the quarter - perpetuating the apparent ascendancy of the gig economy.“The latest labour market statistics show a large rise in employment and a fall in unemployment (with the rate down to 4.7%). The big gain has come from full-time self-employment - a rise of some 94000 on the quarter - perpetuating the apparent ascendancy of the gig economy.
Professor Johnes is also concerned that wage growth dropped again: to just 2.2% year on year.Professor Johnes is also concerned that wage growth dropped again: to just 2.2% year on year.
“Over the last quarter of 2016 there was a large rise in employment in construction - some 36000 new jobs in this sector. The fall in unemployment is patchy across regions, with the latest regional data indicating increases in both London and the West Midlands.“Over the last quarter of 2016 there was a large rise in employment in construction - some 36000 new jobs in this sector. The fall in unemployment is patchy across regions, with the latest regional data indicating increases in both London and the West Midlands.
“Increases in total pay, however, continue to be moderate, with the three month average now growing at an annual rate of 2.2% (down from 2.6% last month). Specifically in construction, the rate of growth has collapsed, and this may be an early sign that the employment growth in that sector may not last.”“Increases in total pay, however, continue to be moderate, with the three month average now growing at an annual rate of 2.2% (down from 2.6% last month). Specifically in construction, the rate of growth has collapsed, and this may be an early sign that the employment growth in that sector may not last.”