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| UK wage squeeze continues, as jobless rate remains at 42-year low – as it happened | UK wage squeeze continues, as jobless rate remains at 42-year low – as it happened |
| (17 days later) | |
| And finally.... here’s our economics editor Larry Elliott on today’s labour market report: | And finally.... here’s our economics editor Larry Elliott on today’s labour market report: |
| Firstly, it is clear that the economy is great at creating jobs but hopeless at generating pay rises. Employment is up by more than 300,000 over the past year but average earnings growth at 2.2% is slightly lower than it was in the summer of 2016. | Firstly, it is clear that the economy is great at creating jobs but hopeless at generating pay rises. Employment is up by more than 300,000 over the past year but average earnings growth at 2.2% is slightly lower than it was in the summer of 2016. |
| Secondly, while employment has been a lot stronger than was feared in the run-up to the Brexit referendum, the pace of growth eased in the three months ending in August. | Secondly, while employment has been a lot stronger than was feared in the run-up to the Brexit referendum, the pace of growth eased in the three months ending in August. |
| Finally, there is no immediate end in sight for the fall in real (inflation-adjusted) wages which have now fallen for a sixth successive month. The Resolution Foundation notes that real average earnings are no higher now than they were in 2016. | Finally, there is no immediate end in sight for the fall in real (inflation-adjusted) wages which have now fallen for a sixth successive month. The Resolution Foundation notes that real average earnings are no higher now than they were in 2016. |
| Larry adds: | Larry adds: |
| It will be well into 2018 before pay growth overtakes inflation – and this relentless squeeze on living standards will have retailers nervous as the key Christmas period nears. Consumers face a choice: tighten their belts or get deeper into debt. | It will be well into 2018 before pay growth overtakes inflation – and this relentless squeeze on living standards will have retailers nervous as the key Christmas period nears. Consumers face a choice: tighten their belts or get deeper into debt. |
| Here’s his full analysis: | Here’s his full analysis: |
| That’s probably all for today. Thanks for reading and commenting. GW | That’s probably all for today. Thanks for reading and commenting. GW |
| The pound has dropped against the US dollar since today’s jobs and earnings figures were released. | The pound has dropped against the US dollar since today’s jobs and earnings figures were released. |
| Sterling has dropped by 0.2% to $1.3166, and is a little lower against the euro at €1.119. | Sterling has dropped by 0.2% to $1.3166, and is a little lower against the euro at €1.119. |
| That’s quite a muted reaction -- reflecting the fact that nothing’s really changed in the UK today. The economy is still creating jobs, and people still aren’t getting pay increases that keep pace with inflation. | That’s quite a muted reaction -- reflecting the fact that nothing’s really changed in the UK today. The economy is still creating jobs, and people still aren’t getting pay increases that keep pace with inflation. |
| So the Bank of England still has to decide whether it should raised interest rates next month, or leave borrowing costs at their record low a bit longer. | So the Bank of England still has to decide whether it should raised interest rates next month, or leave borrowing costs at their record low a bit longer. |
| Last month, it suggested that rates could rise in November; this sparked a sterling rally, which has faded in recent days. | Last month, it suggested that rates could rise in November; this sparked a sterling rally, which has faded in recent days. |
| Sterling / dollar now back below where it was before the BOE hint at a coming rate hike. Political currency! | Sterling / dollar now back below where it was before the BOE hint at a coming rate hike. Political currency! |
| Chris Bailey, European strategist at wealth manager Raymond James, says the BoE faces a tough dilemma: | Chris Bailey, European strategist at wealth manager Raymond James, says the BoE faces a tough dilemma: |
| “Stronger inflation figures would normally point towards a potential interest rate hike which we know is not too far around the corner. But wage growth is an ongoing concern and an interest rate rise would put pressure on the consumer who is already having their earnings eaten away by inflation. | “Stronger inflation figures would normally point towards a potential interest rate hike which we know is not too far around the corner. But wage growth is an ongoing concern and an interest rate rise would put pressure on the consumer who is already having their earnings eaten away by inflation. |
| “Given these factors I believe it is likely that we will see a minor tweak up in interest rates in November but it is not something that I would vote for if I was sitting on the Committee. Concerns around ongoing Brexit discussions and its prevailing uncertainties have only been deepened by today’s disappointing wage growth figures.” | “Given these factors I believe it is likely that we will see a minor tweak up in interest rates in November but it is not something that I would vote for if I was sitting on the Committee. Concerns around ongoing Brexit discussions and its prevailing uncertainties have only been deepened by today’s disappointing wage growth figures.” |
| Here’s our economics correspondent, Richard Partington, on today’s labour market report: | Here’s our economics correspondent, Richard Partington, on today’s labour market report: |
| The lowest levels of unemployment since the mid-70s are still failing to boost the bargaining power of workers in the UK, as official figures show a sixth month of negative real earnings. | The lowest levels of unemployment since the mid-70s are still failing to boost the bargaining power of workers in the UK, as official figures show a sixth month of negative real earnings. |
| Average earnings increased by 2.2% in the three months to August, the same level recorded in the three months to July after a revision to the earlier figures, according to the Office for National Statistics. City economists had forecast growth of 2.1%. | Average earnings increased by 2.2% in the three months to August, the same level recorded in the three months to July after a revision to the earlier figures, according to the Office for National Statistics. City economists had forecast growth of 2.1%. |
| When taking account of inflation, the ONS said real wages fell by 0.4% on the previous year, despite the unemployment rate remaining steady at 4.3% – the joint lowest level since 1975. | When taking account of inflation, the ONS said real wages fell by 0.4% on the previous year, despite the unemployment rate remaining steady at 4.3% – the joint lowest level since 1975. |
| The figures will perplex the Bank of England as it prepares for the first interest rate hike in a decade from as early as next month. The central bank has been looking for signs of pay growth as it seeks to balance a trade-off between supporting jobs and the economy with low rates and cutting the growth in prices. | The figures will perplex the Bank of England as it prepares for the first interest rate hike in a decade from as early as next month. The central bank has been looking for signs of pay growth as it seeks to balance a trade-off between supporting jobs and the economy with low rates and cutting the growth in prices. |
| Howard Archer, chief economic adviser to the EY Item Club, said the data “fails to provide a decisive case” for the Bank to increase the cost of borrowing from 0.25%. “The squeeze on consumers remains appreciable, with obvious negative implications for personal expenditure,” he said. | Howard Archer, chief economic adviser to the EY Item Club, said the data “fails to provide a decisive case” for the Bank to increase the cost of borrowing from 0.25%. “The squeeze on consumers remains appreciable, with obvious negative implications for personal expenditure,” he said. |
| The latest fall in real pay means that average earnings are no higher than they were in February 2006, despite the economy being 4.4% bigger per person than at that time, according to the Resolution Foundation. | The latest fall in real pay means that average earnings are no higher than they were in February 2006, despite the economy being 4.4% bigger per person than at that time, according to the Resolution Foundation. |
| More here: | More here: |
| Over in parliament, prime minister Theresa May and Labour leader Jeremy Corbyn have sparred over today’s labour market figures. | Over in parliament, prime minister Theresa May and Labour leader Jeremy Corbyn have sparred over today’s labour market figures. |
| Corbyn welcomed the drop in unemployment (‘a first’, according to May), before arguing that the fall in real wages shows the economy is weak. What’s the government going to do about it? | Corbyn welcomed the drop in unemployment (‘a first’, according to May), before arguing that the fall in real wages shows the economy is weak. What’s the government going to do about it? |
| May says the government have cut taxes from basic taxpayers (due to the rise in the tax-free allowance, I think), the Living wage, and the doubling of free childcare. | May says the government have cut taxes from basic taxpayers (due to the rise in the tax-free allowance, I think), the Living wage, and the doubling of free childcare. |
| This prompted Corbyn to suggest May breaks her own duck and answers his question... | This prompted Corbyn to suggest May breaks her own duck and answers his question... |
| Here’s a clip: | Here’s a clip: |
| "I wonder if the PM could do a first, and answer a question?": @jeremycorbyn pushes @theresa_may on the cost of living at #PMQs pic.twitter.com/nFgf4lKyaX | "I wonder if the PM could do a first, and answer a question?": @jeremycorbyn pushes @theresa_may on the cost of living at #PMQs pic.twitter.com/nFgf4lKyaX |
| Andy Sparrow’s liveblog has full details of what many commentators are calling a win for the member for Islington North. | Andy Sparrow’s liveblog has full details of what many commentators are calling a win for the member for Islington North. |
| Brexit has made it far harder for the Tories to claim "economic credibility" - one reason for Corbyn's win today. #PMQs | Brexit has made it far harder for the Tories to claim "economic credibility" - one reason for Corbyn's win today. #PMQs |
| #PMQs in Brief: Corbyn had his Weetabix for breakfast, May skipped breakfast. He was good, she was bloody awful | #PMQs in Brief: Corbyn had his Weetabix for breakfast, May skipped breakfast. He was good, she was bloody awful |
| Clear theme to JC's approach today: Tories presiding over a weak economy. Highlights falling real wages, rising personal debt. | Clear theme to JC's approach today: Tories presiding over a weak economy. Highlights falling real wages, rising personal debt. |
| Britain’s youth unemployment rate has fallen to 11.9% over the last year, from 13.7%. | Britain’s youth unemployment rate has fallen to 11.9% over the last year, from 13.7%. |
| That’s because fewer 16-24 year olds are looking for work, and more are in full-time education (or economically inactive for other reasons). | That’s because fewer 16-24 year olds are looking for work, and more are in full-time education (or economically inactive for other reasons). |
| But the real wage squeeze is hurting young people who are in work (earlier this week, we learned that many are having to borrow to pay for basics) | But the real wage squeeze is hurting young people who are in work (earlier this week, we learned that many are having to borrow to pay for basics) |
| Dr Carole Easton OBE, chief executive of the Young Women’s Trust, says young mothers are finding it particularly tough: | Dr Carole Easton OBE, chief executive of the Young Women’s Trust, says young mothers are finding it particularly tough: |
| “We have a youth debt epidemic and, as prices rise and wages remain low, this is only set to worsen. It’s time for action. | “We have a youth debt epidemic and, as prices rise and wages remain low, this is only set to worsen. It’s time for action. |
| “Young women in particular are getting stuck on low pay, falling into debt and using foodbanks to put food on the table. It can be especially hard for young mums; in many cases, low pay means an hour’s childcare can cost more than an hour’s wages. | “Young women in particular are getting stuck on low pay, falling into debt and using foodbanks to put food on the table. It can be especially hard for young mums; in many cases, low pay means an hour’s childcare can cost more than an hour’s wages. |
| Join Nia and us in calling for the National Living Wage to be extended to young people. #Petition #NotWorthLess: https://t.co/nQIWiYlF78 pic.twitter.com/4H3ZwtyIXh | Join Nia and us in calling for the National Living Wage to be extended to young people. #Petition #NotWorthLess: https://t.co/nQIWiYlF78 pic.twitter.com/4H3ZwtyIXh |
| Estate agents and hairdressers are suffering some of the tightest wage squeezes, today’s report shows. | Estate agents and hairdressers are suffering some of the tightest wage squeezes, today’s report shows. |
| City workers, administrators and IT staff, though, are getting inflation-beating pay packets: | City workers, administrators and IT staff, though, are getting inflation-beating pay packets: |
| (this shows real wages - so pay minus inflation) | (this shows real wages - so pay minus inflation) |
| Britain’s employment rate has fallen back from its record high. | Britain’s employment rate has fallen back from its record high. |
| The proportion of 16-64 year olds in work dipped to 75.1% in the three months to August, down from 75.3% a month ago. | The proportion of 16-64 year olds in work dipped to 75.1% in the three months to August, down from 75.3% a month ago. |
| The employment rate had been rising steadily since the end of 2011, as Britain clawed its way back from the financial crisis. | The employment rate had been rising steadily since the end of 2011, as Britain clawed its way back from the financial crisis. |
| Now, it’s very plausible that last month’s small fall is only a blip. | Now, it’s very plausible that last month’s small fall is only a blip. |
| But, it could be a sign that the labour market has peaked..... | But, it could be a sign that the labour market has peaked..... |
| Sarah O’Connor, the FT’s employment correspondent, tweets: | Sarah O’Connor, the FT’s employment correspondent, tweets: |
| Probably just a blip, this small dip in the employment rate, but one to watch.... pic.twitter.com/WYXTVKFXwd | Probably just a blip, this small dip in the employment rate, but one to watch.... pic.twitter.com/WYXTVKFXwd |
| Here are more figures from the Resolution Foundation, showing how the wage squeeze will intensify in the run-up to Christmas. | Here are more figures from the Resolution Foundation, showing how the wage squeeze will intensify in the run-up to Christmas. |
| Latest RF pay projection following average earnings figures today and inflation yesterday - pay squeeze set to deepen in the coming months pic.twitter.com/FWsB2Cc1tG | Latest RF pay projection following average earnings figures today and inflation yesterday - pay squeeze set to deepen in the coming months pic.twitter.com/FWsB2Cc1tG |
| A handy breakdown of the UK labour market: | A handy breakdown of the UK labour market: |
| 32.10m people in work and 1.44m unemployed people for Jun-Aug 2017 pic.twitter.com/OZ0gPvMYok | 32.10m people in work and 1.44m unemployed people for Jun-Aug 2017 pic.twitter.com/OZ0gPvMYok |
| This graph shows how UK unemployment fell to 4.3% in the last quarter. | This graph shows how UK unemployment fell to 4.3% in the last quarter. |
| There are now 1.44 million unemployed people in the UK, down 215,000 in the last year. | There are now 1.44 million unemployed people in the UK, down 215,000 in the last year. |
| The jobless rate hasn’t been lower since since Harold Wilson was prime minister. | The jobless rate hasn’t been lower since since Harold Wilson was prime minister. |
| This chart shows how wage growth slowed at the start of this year, and hasn’t recovered strongly since. | This chart shows how wage growth slowed at the start of this year, and hasn’t recovered strongly since. |
| An extra 420,000 jobs have been created in the last year -- this chart shows the key changes: | An extra 420,000 jobs have been created in the last year -- this chart shows the key changes: |
| Britain’s bosses (the men and women with their hands on the purse strings) argue that productivity needs to rise so they can deliver wage increases. | Britain’s bosses (the men and women with their hands on the purse strings) argue that productivity needs to rise so they can deliver wage increases. |
| Matthew Percival, CBI Head of Employment, says the government can, and must, help: | Matthew Percival, CBI Head of Employment, says the government can, and must, help: |
| “Persistently weak productivity, coupled with falling real wages, continues to hit living standards, underlining the need for the Chancellor to bold in his Budget. | “Persistently weak productivity, coupled with falling real wages, continues to hit living standards, underlining the need for the Chancellor to bold in his Budget. |
| “Delivering urgent progress on large and small infrastructure projects, addressing underfunding in education and providing practical support for innovators are all steps the Government can take as part of a meaningful Industrial Strategy to boost productivity, the only sustainable route to improving people’s pay.” | “Delivering urgent progress on large and small infrastructure projects, addressing underfunding in education and providing practical support for innovators are all steps the Government can take as part of a meaningful Industrial Strategy to boost productivity, the only sustainable route to improving people’s pay.” |
| The Resolution Foundation have spotted that average earnings (adjusted for inflation) are no higher than they were back in February 2006, thanks to this latest slump in real wages. | The Resolution Foundation have spotted that average earnings (adjusted for inflation) are no higher than they were back in February 2006, thanks to this latest slump in real wages. |
| Stephen Clarke, their economic analyst, explains: | Stephen Clarke, their economic analyst, explains: |
| “Today’s figures confirm the big picture trend that the UK labour market is great at creating jobs, but terrible at raising people’s pay. | “Today’s figures confirm the big picture trend that the UK labour market is great at creating jobs, but terrible at raising people’s pay. |
| “The scale of the pay squeeze over the last decade is so vast that people today are earning no more than they did back in February 2006, despite the economy being 4.4 per cent bigger per person since then.” | “The scale of the pay squeeze over the last decade is so vast that people today are earning no more than they did back in February 2006, despite the economy being 4.4 per cent bigger per person since then.” |
| Britons would need a £15 per week pay rise to get back to the levels before the financial crisis. | Britons would need a £15 per week pay rise to get back to the levels before the financial crisis. |
| Average pay falls back to February 2006 levels as jobs market holds steady @stephenlclarke on today's @ONS figures https://t.co/gpxpypjetP pic.twitter.com/mD9HeIrklT | Average pay falls back to February 2006 levels as jobs market holds steady @stephenlclarke on today's @ONS figures https://t.co/gpxpypjetP pic.twitter.com/mD9HeIrklT |
| Geraint Johnes, professor of Economics at Lancaster University Management School, has spotted that workers in the financial sector are getting decent enough pay rises.... | Geraint Johnes, professor of Economics at Lancaster University Management School, has spotted that workers in the financial sector are getting decent enough pay rises.... |
| The 3 month average measure of total pay growth indicates that earnings have risen by 2.2% over the last year. This represents no change on the previous month. There has been some acceleration in pay in the financial and business services (where pay growth is now 2.7%, or, on the less reliable single-month measure, 3.1%). | The 3 month average measure of total pay growth indicates that earnings have risen by 2.2% over the last year. This represents no change on the previous month. There has been some acceleration in pay in the financial and business services (where pay growth is now 2.7%, or, on the less reliable single-month measure, 3.1%). |
| But in many industries – including the public sector, manufacturing, construction and distribution – pay growth is still below 2%. This does not suggest that it is yet time for the Bank of England to be hiking interest rates.” | But in many industries – including the public sector, manufacturing, construction and distribution – pay growth is still below 2%. This does not suggest that it is yet time for the Bank of England to be hiking interest rates.” |
| Jeremy Cook, Chief Economist at WorldFirst, fears that UK unemployment will soon start to rise. | Jeremy Cook, Chief Economist at WorldFirst, fears that UK unemployment will soon start to rise. |
| He argues that the wage squeeze means consumers will spend less in the shops, hitting profits and forcing firms to lay off staff (creating something of a vicious circle...) | He argues that the wage squeeze means consumers will spend less in the shops, hitting profits and forcing firms to lay off staff (creating something of a vicious circle...) |
| He writes: | He writes: |
| “The story of the labour market remains the same: more people earning weaker wages. These figures do nothing to change our belief that a lack of real wage gains are going to continue to impinge on the ability of consumers to remain the driving force of UK growth. | “The story of the labour market remains the same: more people earning weaker wages. These figures do nothing to change our belief that a lack of real wage gains are going to continue to impinge on the ability of consumers to remain the driving force of UK growth. |
| “The pace of price increases is at a near-term high and the next few months may also mark the peak of employment. UK businesses, particularly those who import from abroad or are part of global supply chains, have laboured under a slowing economy and higher costs courtesy of the falling pound. Should neither consumption or investment provide these companies – particularly retailers - with a strong Christmas, then we would expect to see the ‘good’ news of falling unemployment start to reverse as businesses react to lost margins cutting into the corporate bone.” | “The pace of price increases is at a near-term high and the next few months may also mark the peak of employment. UK businesses, particularly those who import from abroad or are part of global supply chains, have laboured under a slowing economy and higher costs courtesy of the falling pound. Should neither consumption or investment provide these companies – particularly retailers - with a strong Christmas, then we would expect to see the ‘good’ news of falling unemployment start to reverse as businesses react to lost margins cutting into the corporate bone.” |
| Real wages will probably keep shrinking for many more months, warns James Smith of ING: | Real wages will probably keep shrinking for many more months, warns James Smith of ING: |
| Crunching the numbers, we don’t expect wage growth to go much above 2.1% or 2.2% before next summer. | Crunching the numbers, we don’t expect wage growth to go much above 2.1% or 2.2% before next summer. |
| So whilst we expect headline inflation to peak at 3.1% next month, the gap between CPI and wage growth is likely to stay fairly wide for some time to come. | So whilst we expect headline inflation to peak at 3.1% next month, the gap between CPI and wage growth is likely to stay fairly wide for some time to come. |
| Maike Currie, investment director for Personal Investing at Fidelity International, says the rise of the ‘gig’ economy, and the government’s public sector pay cap, are partly to blame for the wage squeeze. | Maike Currie, investment director for Personal Investing at Fidelity International, says the rise of the ‘gig’ economy, and the government’s public sector pay cap, are partly to blame for the wage squeeze. |
| “Another month, another fall in real household incomes. Today’s wage growth figures show our total earnings including bonuses grew at just 2.2% in the three months to August . With yesterday’s CPI figures showing inflation spiking to an eye watering 3%, the gap between our pay packets and the cost of goods and services continues to remain vast - our wages are not keeping up with the rising cost of living. | “Another month, another fall in real household incomes. Today’s wage growth figures show our total earnings including bonuses grew at just 2.2% in the three months to August . With yesterday’s CPI figures showing inflation spiking to an eye watering 3%, the gap between our pay packets and the cost of goods and services continues to remain vast - our wages are not keeping up with the rising cost of living. |
| “The absence of wage growth remains the missing piece of the puzzle in the UK’s slow road to recovery - high employment should be the worker’s best friend because that’s what pushes up wages. With UK unemployment at a 45-year low, one would think that workers’ bargaining power at the wage negotiation table would improve, yet earnings growth remains elusive and the UK’s workforce is getting poorer. There are many potential reasons for this ranging from poor productivity to the squeeze on public sector pay and the rise of self-employment in the so-called ‘gig economy’. | “The absence of wage growth remains the missing piece of the puzzle in the UK’s slow road to recovery - high employment should be the worker’s best friend because that’s what pushes up wages. With UK unemployment at a 45-year low, one would think that workers’ bargaining power at the wage negotiation table would improve, yet earnings growth remains elusive and the UK’s workforce is getting poorer. There are many potential reasons for this ranging from poor productivity to the squeeze on public sector pay and the rise of self-employment in the so-called ‘gig economy’. |