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| UK pay squeeze worsens as real wages fall again - business live | |
| (35 minutes later) | |
| 10.04am BST | |
| 10:04 | |
| Maike Currie, investment director for personal investing at Fidelity International, has a few theories for why real wages are shrinking again. | |
| One could be ‘slack in the labour market’ - which is economist speak for the fact that the jobs market isn’t working as well as it could. | |
| This is usually down to underemployment: people working part-time who want a full-time job or hidden unemployment: people who are not actively looking for work but who would rejoin the workforce if the jobs market were stronger. | |
| Another factor is the problem of poor productivity. This isn’t unique to the UK and has been an issue in many developed world economies since the financial crisis. While most economists concur that slowing productivity is one of the most serious problems in their field today, few can agree on the cause and still less on the right response. | |
| Whatever the reason, the situation looks pretty bad: | |
| 9.59am BST | |
| 09:59 | |
| TUC: Cost of living crisis looms | |
| The TUC, which represents Britain’s workers, is calling on the government to act now and end its curbs on public sector pay. | |
| TUC General Secretary Frances O’Grady says the policy (which restricts pay rises to 1%) must go. | |
| “Real wages have fallen for the second month in a row. Unless the government gets its act together, we’ll soon be in the middle of another cost of living crisis. | |
| “Ministers must focus on delivering better-paid jobs across the UK. And it’s time to bin the artificial pay restrictions on nurses, midwives and other public sector workers. | |
| “Britain needs a pay rise, not more pressure on household budgets.” | |
| 9.56am BST | |
| 09:56 | |
| The fall in UK real wages is likely to hurt economic growth, warns Naeem Aslam of Think Markets. | |
| It is the UK consumers who have been pulling the UK economy and if we see them slowing down, it surely means that economy cannot do well | |
| Brexit is certainly on the centre stage when it comes to this and I personally believe that investors are feeling the impact of this. | |
| 9.53am BST | |
| 09:53 | |
| Real pay shrinks: snap reaction | |
| Dutch bank ING is alarmed by the slowdown in UK pay growth, at a time when Britain’s political future is so unclear. | |
| #UK employment: Key story is 1.7% wage growth now considerably below 2.9% inflation. Political uncertainty not good for labour market $GBP | |
| Bloomberg’s Sarah Rappaport is worried about the impact on the public: | |
| Wage growth in the UK slowing to 1.7%, lagging further behind inflation. Effectively, this is squeezing U.K. households | |
| Duncan Weldon of Resolution Group is concerned that the link between wages and unemployment appears to have broken down (with unemployment at a 42-year low, labour scarcity should drive earnings up). | |
| Joint highest employment rate since records began in 1971, joint lowest unemployment rate since 1975. But... terrible wage growth figures. | |
| Broad-based slowdown in nominal pay growth. pic.twitter.com/cjk5WpwDHY | |
| Missing: the UK Philips Curve. If seen, please contact the Bank of England. | |
| 9.49am BST | |
| 09:49 | |
| Today’s report also shows that British workers are suffering the worst wage squeeze in two and a half years. | |
| The ONS says: | |
| Between February to April 2016 and February to April 2017 in real terms (that is, adjusted for consumer price inflation) total pay for employees in Great Britain fell by 0.4%, the lowest growth rate since July to September 2014. | |
| 9.42am BST | |
| 09:42 | |
| ONS: Real pay is falling | |
| If you include bonuses, average pay grew by 2.1%. That’s better than the 1.7% rise in regular pay, but still not enough to keep up with inflation. | |
| The Office for National Statistics says: | |
| Latest estimates show that average weekly earnings for employees in Great Britain in real terms (that is, adjusted for price inflation) fell by 0.4% including bonuses, and fell by 0.6% excluding bonuses, compared with a year earlier. | |
| 9.34am BST | 9.34am BST |
| 09:34 | 09:34 |
| UK real wages squeeze worsens | UK real wages squeeze worsens |
| Breaking! Basic pay in the UK economy grew by a meagre 1.7% year-on-year in the three months to April. | Breaking! Basic pay in the UK economy grew by a meagre 1.7% year-on-year in the three months to April. |
| That’s much worse than expected, and also the lowest rise in regular pay since February 2016. | |
| It means that real wages are shrinking at an even faster rate than feared -- inflation was 2.7% in April (and 2.9% in May!) so pay simply isn’t keep pace with the cost of living. | |
| Today’s jobs report also shows that the unemployment rate remained at a 42-year low of 4.6%. The number of people out of work fell by 50,000 in the three months to April. | Today’s jobs report also shows that the unemployment rate remained at a 42-year low of 4.6%. The number of people out of work fell by 50,000 in the three months to April. |
| The employment total jumped by 109,000 during the quarter, to 31.954. | The employment total jumped by 109,000 during the quarter, to 31.954. |
| More to follow! | More to follow! |
| Updated | |
| at 9.43am BST | |
| 9.27am BST | 9.27am BST |
| 09:27 | 09:27 |
| The pound is dipping back as City traders brace for the jobs report... | The pound is dipping back as City traders brace for the jobs report... |
| Stand by your desks! UK wages and unemployment data is due soon #GBP #GDP | Stand by your desks! UK wages and unemployment data is due soon #GBP #GDP |
| 9.12am BST | 9.12am BST |
| 09:12 | 09:12 |
| The pound should strengthen if today’s wage figures are less grim than feared. | The pound should strengthen if today’s wage figures are less grim than feared. |
| Neil Wilson of ETX Capital says: | Neil Wilson of ETX Capital says: |
| Unemployment is likely to be decent so the focus is on earnings. Stronger-than-expected wage growth could help support sterling a touch as it will help offset concerns that falling real wages is destroying consumer spending. | Unemployment is likely to be decent so the focus is on earnings. Stronger-than-expected wage growth could help support sterling a touch as it will help offset concerns that falling real wages is destroying consumer spending. |
| Yesterday’s inflation beat at 2.9% highlights the problems facing the economy so a sign that earnings are at least trying to keep pace will be welcome and allay concerns that consumers stop spending. | Yesterday’s inflation beat at 2.9% highlights the problems facing the economy so a sign that earnings are at least trying to keep pace will be welcome and allay concerns that consumers stop spending. |
| City economists expect that total pay rose by 2.4% in the three months to April - but only by 2.0% if bonuses are stripped out. We’ll find out if they’re right in 20 minutes... | City economists expect that total pay rose by 2.4% in the three months to April - but only by 2.0% if bonuses are stripped out. We’ll find out if they’re right in 20 minutes... |
| 9.01am BST | 9.01am BST |
| 09:01 | 09:01 |
| You can get up to speed on the state of Britain’s labour market with these charts from economist Rupert Seggins: | You can get up to speed on the state of Britain’s labour market with these charts from economist Rupert Seggins: |
| (1/5)The big labour market news was yesterday's inflation rise. Consensus is sub-inflation 2%y/y regular pay growth. New @ONS figs at 9:30 pic.twitter.com/dKiNjw60yX | (1/5)The big labour market news was yesterday's inflation rise. Consensus is sub-inflation 2%y/y regular pay growth. New @ONS figs at 9:30 pic.twitter.com/dKiNjw60yX |
| (2/5) The bigger picture is that the past 10 years have been the worst for pay growth in 155 years. pic.twitter.com/YHBVGA1ayF | (2/5) The bigger picture is that the past 10 years have been the worst for pay growth in 155 years. pic.twitter.com/YHBVGA1ayF |
| (3/5)Lots of attention on recent energy/food/sterling-fuelled inflation, but longer term, earnings and productivity are pretty tied together pic.twitter.com/H0NMDAxhMK | (3/5)Lots of attention on recent energy/food/sterling-fuelled inflation, but longer term, earnings and productivity are pretty tied together pic.twitter.com/H0NMDAxhMK |
| (4/5)The good news is that the UK employment juggernaut continues to rumble on. Consensus is for a 125k increase on the 3 months to January. pic.twitter.com/8eBaHpyp43 | (4/5)The good news is that the UK employment juggernaut continues to rumble on. Consensus is for a 125k increase on the 3 months to January. pic.twitter.com/8eBaHpyp43 |
| (5/5) Keep an eye on the claimant count rate. Consensus is for it to remain at 2.3%, but it has been rising of late. pic.twitter.com/QBqSeWpBPA | (5/5) Keep an eye on the claimant count rate. Consensus is for it to remain at 2.3%, but it has been rising of late. pic.twitter.com/QBqSeWpBPA |
| 8.52am BST | 8.52am BST |
| 08:52 | 08:52 |
| The US dollar is under some pressure today ahead of the Federal Reserve decision, which is helping nudge the pound up. | The US dollar is under some pressure today ahead of the Federal Reserve decision, which is helping nudge the pound up. |
| With an interest rate hike today ‘priced in’, traders are focusing on the tone of the decision from the Federal Reserve’s Open Market Committee. | With an interest rate hike today ‘priced in’, traders are focusing on the tone of the decision from the Federal Reserve’s Open Market Committee. |
| Kit Juckes of French bank Societe Generale expects the Fed to sound cautious about the long-term path for interest rates. | Kit Juckes of French bank Societe Generale expects the Fed to sound cautious about the long-term path for interest rates. |
| The FOMC’s response is likely to be a ‘dovish hike’ and that’s priced in, to a large degree. Uncertain about how much slack there is in the economy or the labour market, FOCM members are inclined to want to ‘normalise’ rates while they have the chance, but they seem very pragmatic about the longer-term outlook. | The FOMC’s response is likely to be a ‘dovish hike’ and that’s priced in, to a large degree. Uncertain about how much slack there is in the economy or the labour market, FOCM members are inclined to want to ‘normalise’ rates while they have the chance, but they seem very pragmatic about the longer-term outlook. |
| So more likely to raise rates now, without overlay hawkish commentary, and then lay the groundwork for another hike in the autumn if markets don’t take fright in the weeks ahead. | So more likely to raise rates now, without overlay hawkish commentary, and then lay the groundwork for another hike in the autumn if markets don’t take fright in the weeks ahead. |
| 8.38am BST | 8.38am BST |
| 08:38 | 08:38 |
| In the City, the FTSE 250 index - which contains medium-sized UK-focused firms - has jumped by 0.5% in early trading. | In the City, the FTSE 250 index - which contains medium-sized UK-focused firms - has jumped by 0.5% in early trading. |
| Housebuilder Bellway is the biggest riser, up 3.6%, after reporting that customer demand for new homes is still strong. | Housebuilder Bellway is the biggest riser, up 3.6%, after reporting that customer demand for new homes is still strong. |
| The blue-chip FTSE 100 index is flat, although its housebuilders (Taylor Wimpey, Barratt and Persimmon) are all rising. | The blue-chip FTSE 100 index is flat, although its housebuilders (Taylor Wimpey, Barratt and Persimmon) are all rising. |
| 8.15am BST | 8.15am BST |
| 08:15 | 08:15 |
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| 8.13am BST | 8.13am BST |
| 08:13 | 08:13 |
| Pound pushes towards $1.28 | Pound pushes towards $1.28 |
| Sterling is rising in early trading, hitting its highest level since Britain’s shock general election results landed. | Sterling is rising in early trading, hitting its highest level since Britain’s shock general election results landed. |
| The pound has gained a third of a cent to $1.278, as traders brace for this morning’s UK jobs report. | The pound has gained a third of a cent to $1.278, as traders brace for this morning’s UK jobs report. |
| It’s also a little higher against the euro, at just below €1.14. | It’s also a little higher against the euro, at just below €1.14. |
| The possibility that Britain could now seek a ‘softer Brexit’ from the European Union is helping the pound recover. | The possibility that Britain could now seek a ‘softer Brexit’ from the European Union is helping the pound recover. |
| FXTM research analyst Lukman Otunuga explains: | FXTM research analyst Lukman Otunuga explains: |
| Currency investors remained cautiously optimistic over a softer Brexit following last week’s UK election outcome, resulting in a hung parliament. | Currency investors remained cautiously optimistic over a softer Brexit following last week’s UK election outcome, resulting in a hung parliament. |
| Although the political uncertainty in the UK and pending Brexit negotiations are still in focus, much attention will be directed towards the UK jobs report this morning. | Although the political uncertainty in the UK and pending Brexit negotiations are still in focus, much attention will be directed towards the UK jobs report this morning. |
| 7.51am BST | 7.51am BST |
| 07:51 | 07:51 |
| The agenda: UK jobs report and Federal Reserve decision | The agenda: UK jobs report and Federal Reserve decision |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| Britain’s cost of living squeeze will be dragged back into the spotlight today, when the latest employment data is released. | Britain’s cost of living squeeze will be dragged back into the spotlight today, when the latest employment data is released. |
| City economists fear today’s figures will show that wages are falling further behind inflation, which has been driven up to 2.9% in May by the weak pound (as we learned yesterday). | City economists fear today’s figures will show that wages are falling further behind inflation, which has been driven up to 2.9% in May by the weak pound (as we learned yesterday). |
| Basic pay rises (excluding bonuses) are expected to have fallen to 2.0% in the three months to April. That would mean real wages have kept falling this year, bringing more pain to struggling families across the country. | Basic pay rises (excluding bonuses) are expected to have fallen to 2.0% in the three months to April. That would mean real wages have kept falling this year, bringing more pain to struggling families across the country. |
| On a more positive note, the unemployment rate may remain at a 42-year low (last month it fell to 4.6% , the lowest since 1975), and the employment total probably kept rising in the last quarter. | On a more positive note, the unemployment rate may remain at a 42-year low (last month it fell to 4.6% , the lowest since 1975), and the employment total probably kept rising in the last quarter. |
| RBC Capital Markets say: | RBC Capital Markets say: |
| Unless last month’s gains somehow turn out to be a total blip, it wouldn’t be too surprising if the level of employment rises again by close to a triple-digit number of thousands in the three months to April. | Unless last month’s gains somehow turn out to be a total blip, it wouldn’t be too surprising if the level of employment rises again by close to a triple-digit number of thousands in the three months to April. |
| The rotation of workers out of part-time roles into full-time employment is now an established theme and if we see this trend once more it would imply that slack is being partially eroded as a result of reduced ‘underemployment’. | The rotation of workers out of part-time roles into full-time employment is now an established theme and if we see this trend once more it would imply that slack is being partially eroded as a result of reduced ‘underemployment’. |
| It’s also a big day for the US economy. America’s central bank, the Federal Reserve, is widely expected to raise interest rates today - to a target range of 1% to 1.25% (from 0.75% to 1%). | It’s also a big day for the US economy. America’s central bank, the Federal Reserve, is widely expected to raise interest rates today - to a target range of 1% to 1.25% (from 0.75% to 1%). |
| Fed chair Janet Yellen will then face the press and give her views on the state of the economy. Wall Street experts predict she’ll try to squash speculation that the Fed is too hawkish. | Fed chair Janet Yellen will then face the press and give her views on the state of the economy. Wall Street experts predict she’ll try to squash speculation that the Fed is too hawkish. |
| As Lew Alexander, chief economist at Nomura, put it (via Marketwatch): | As Lew Alexander, chief economist at Nomura, put it (via Marketwatch): |
| “We do expect her to try to be somewhat forceful in conveying...to market participants that their skepticism over hikes after the June meeting may not be warranted.” | “We do expect her to try to be somewhat forceful in conveying...to market participants that their skepticism over hikes after the June meeting may not be warranted.” |
| Tomorrow at 2:30 p.m. ET: Chair #Yellen hosts live #FOMC press conference: https://t.co/AknBNh2ef4 pic.twitter.com/mOjT9owfyr | Tomorrow at 2:30 p.m. ET: Chair #Yellen hosts live #FOMC press conference: https://t.co/AknBNh2ef4 pic.twitter.com/mOjT9owfyr |
| We also get new eurozone unemployment figures, plus new retail sales and inflation statistics from America. | We also get new eurozone unemployment figures, plus new retail sales and inflation statistics from America. |
| European stock markets are expected to be flattish, as investors hunker down ahead of the Fed decision tonight. | European stock markets are expected to be flattish, as investors hunker down ahead of the Fed decision tonight. |
| Opening Call at @LCGTrading #FTSE -4 points at 7496#DAX +22 points at 12787#CAC +16 points at 5277#EuroStoxx +4 points at 3561 | Opening Call at @LCGTrading #FTSE -4 points at 7496#DAX +22 points at 12787#CAC +16 points at 5277#EuroStoxx +4 points at 3561 |
| Here’s the agenda: | Here’s the agenda: |
| 9.30am BST: UK labour market report | 9.30am BST: UK labour market report |
| 10am BST: Eurozone employment report for Q1 2017 | 10am BST: Eurozone employment report for Q1 2017 |
| 1.30pm BST: US inflation report for May | 1.30pm BST: US inflation report for May |
| 1.30pm BST: US retail sales for May | 1.30pm BST: US retail sales for May |
| 7pm BST: US Federal Reserve interest rate decision | 7pm BST: US Federal Reserve interest rate decision |
| 7.30pm BST: Fed chair Janet Yellen’s press conference | 7.30pm BST: Fed chair Janet Yellen’s press conference |
| Updated | Updated |
| at 8.07am BST | at 8.07am BST |