UK unemployment rate rises and real regular pay falls; markets in turmoil – business live

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Introduction: UK jobless rate rises as basic pay lags inflation

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

The UK’s unemployment rate has risen, as regular pay continues to fall behind inflation at the fastest rate in a decade.

The latest jobs data, just released, show that the unemployment rate rose to 3.8% in the three months to April, as more people look for work.

That’s up from 3.7% in the quarter to March (which was the lowest in 50 years), and may show the UK’s jobs recovery is softening.

⚠️ First uptick in the UK unemployment rate since the Covid crisis. May be a blip… but the message is clear: the easy part of the UK economic recovery is behind us & things are starting to turn. Watch the UK closely… will be a canary in the coalmine for a global downturn $GBP pic.twitter.com/4J1lb8eFsc

— Viraj Patel (@VPatelFX) June 14, 2022

Basic pay continues to lag behind rising prices too, as the cost of living crisis hits households.

Regular pay rose by 4.2% in the February-April quarter, well behind inflation which hit 9% in May.

Total pay, including bonuses, was much stronger though — up 6.8% thanks to surging bonuses in the financial sector.

So in real terms (adjusted for inflation), total pay grew by 0.4% in the quarter while regular pay tumbled by 2.2% on the year.

That’s the biggest drop in real regular pay since late 2011, adding to pressure on families struggle to pay food and energy bills.

After taking inflation into account, average pay including bonuses rose 0.4% in the year to February to April 2022, thanks to strong bonuses.

However, excluding bonuses, pay fell by 2.2% in real terms https://t.co/iB6VqmLG3N pic.twitter.com/LJL6vVrPQF

— Office for National Statistics (ONS) (@ONS) June 14, 2022

Firms are still taking on staff, though. The number of people on company payrolls increased to a fresh record high, up 90,000 in May to 29.6 million.

The number of job vacancies in March to May 2022 rose to a new record of 1,300,000. However, the rate of growth in vacancies continued to slow down.

Redundancies decreased on the quarter and are at record low levels, as firms hold onto staff.

But, the employment rate is still below pre-pandemic levels, due to the drop in self-employment in the pandemic.

More details and reaction to follow…

Also coming up today

Stock markets are in a very nervous mood, after Wall Street fell into a bear market last night.

The S&P 500 index tumbled almost 4% and closed over 20% below its record high, while US government bond prices surged, on growing expectations that the US Federal Reserve could lift interest rates very sharply on Wednesday.

A 75 basis-point rise , triple the usual move, is now seen as an option to get a grip on inflation.

This has intensified fears that central banks could push economies into recession, which has driven up the yield on government bonds dramatically.

Asia-Pacific stock markets were pounded overnight, with Australia’s main index dropping almost 4% and Japan’s Nikkei shedding 1.5%.

European stocks are due to open a little higher after Monday’s rout, but it could be another volatile day.

Bonds yesterday. Here’s hoping exhaustion sets in and they spend the day sleeping it off. So far, a nervous-looking Turnaround Tuesday…2s and 10s together at 3.34%, S&P futures up 1%, dollar a little softer. UK jobs and US PPI ahead. pic.twitter.com/Tks2BdxBZ5

— kit Juckes (@kitjuckes) June 14, 2022

The agenda

  • 7am BST: UK unemployment report for May
  • 10am BST: ZEW index of Gemran investor confidence
  • 10.30am BST: The Business, Energy and Industrial Strategy (BEIS) Committee holds a hearing into the UK’s flight cancellations
  • 11am BST: NFIB small US business optimism index
  • 1.30pm BST: US PPI index of producer prices

Capital Economics: early signs of softening

Today’s jobs report could be an early sign that the slowdown in economic activity this year is hitting the labour market, says Paul Dales, chief UK economist at Capital Economics.

The 177,000 rise in employment in the three months to April beat the consensus forecast of a 107,000 again, but even so the unemployment rate edged up from 3.7% to 3.8% (consensus 3.6%).

What’s more, the single month data showed that employment fell by 254,000 in April itself and the unemployment rate rose from 3.5% in March to 4.2%.

What’s more, the number of job vacancies hardly rose at all, from 1.296m in April to 1.300m in the three months to May. And our own seasonal adjustments of the single-month data suggest that vacancies fell in May for the first time since COVID-19 was rife in December.

Political reaction

Chancellor of the Exchequer, Rishi Sunak, says his £15bn cost of living package will help families through the cost of living squeeze.

“Today’s stats show our jobs market remains robust with redundancies at an all time low.

“Helping people into work is the best way to support families in the long term, and we are continuing to support people into new and better jobs.

“We are also providing immediate help with rising prices – 8 million of the most vulnerable families will receive at least £1,200 of direct payments this year, with all families receiving £400.”

But Jonathan Ashworth MP, Labour’s Shadow Work and Pensions Secretary, says the government is far too complacent about the challenge:

Work shuld be the best defence from the rising cost of living yet millions in work are in poverty, real wages are plummeting, the numbers in overall employment are below pre-pandemic levels, and the numbers on out of work benefits not looking for work is higher than pre-pandemic.

“With record vacancies in the labour market and inflation at the highest level for 40 years, ministers have shown utter complacency about the huge levels of economic inactivity.

“In contrast, Labour will reform employment support to help people return to work, tackle the rising the cost of living, and build a prosperous economy with quality well-paid jobs.”

Bonuses are making a huge difference to the impact of rising prices.

Include them, and total pay outpaced inflation, just. That’s partly due to a boom year in the City — British bankers collected the biggest bonuses since before the 2008 global financial crisis ealier this year.

But most people don’t get bonuses — and their basic pay saw the biggest drop since 2011 after inflation.

The biggest decline in inflation-adjusted regular pay in the UK since late 2011 at -2.2%… BUT bonus payments continue to make total average pay +ve in real terms (+0.4%). pic.twitter.com/TmO4TQ90Qe

— Stuart McIntyre (@stuartgmcintyre) June 14, 2022

The belt-tightening intensifies as prices rise faster than wages.

Strong bonuses have kept total pay rising in line with inflation. But for anyone who hasn’t had a bonus (most people) disposable income (February – April) fell in real terms by 2.2% on the year. pic.twitter.com/8wz82sxNKJ

— Joel Hills (@ITVJoel) June 14, 2022

Kitty Ussher, Chief Economist at the Institute of Directors, says firms are hiring as fast as they can, with payrolls and vacancies both up in the last quarter.

This suggests order books remain strong and there is still plenty of demand in the economy.

“Encouragingly for businesses struggling with staff shortages, more people are now also being tempted to re-join the labour market having slipped into inactivity during the pandemic: the employment rate is up 0.2% on the previous quarter. If this trend continues, it should make future vacancies easier to fill, and also reduce inflationary pressure.

“However, there are also early signs that the labour market is beginning to settle, with the rate of unemployment steadying at its new low level in recent months, a small increase in short-term unemployment, and a slowing of the rate of increase in vacancies.”

Here’s some snap analysis of the jobs report, from Sam Avanzo Windett, deputy director at the Learning and Work Institute:

Today’s @ONS stats show interesting changes in unemployment – people becoming unemployed (up to 6months) saw the largest increase since late 2020. People unemployed between 6 -12 months has decreased to a record low, and unemployed 12 months+ also continued to decrease.

— Sam Avanzo Windett (@SamanthaWindett) June 14, 2022

We may be seeing the rise in economic inactivity top out, with today’s @ONS figures showing the economic inactivity rate decreased by 0.1 percentage points to 21.3% in February to April 2022 (the drop largely driven by students)

— Sam Avanzo Windett (@SamanthaWindett) June 14, 2022

Whilst we see the cost of living continue to bite, with real terms regular pay (exc. bonuses and adjusted for inflation) falling on the year by 2.2% @ONS

— Sam Avanzo Windett (@SamanthaWindett) June 14, 2022

ONS: It’s a mixed picture

Today’s jobs report continues to show a mixed picture for the labour market, says Sam Beckett, head of economic statistics at the Office for National Statistics (ONS).

“While the number of people in employment is up again in the three months to April, the figure remains below pre-pandemic levels.

“Moreover, although the number of people neither in work nor looking for a job has fallen slightly in the latest period, that remains well up on where it was before Covid-19 struck.

“At the same time, unemployment is close to a 50-year low point and there was a record low number of redundancies.

“Job vacancies are still slowly rising, too. At a new record level of 1.3 million, this is over half a million more than before the onset of the pandemic.”

“The high level of bonuses continues to cushion the effects of rising prices on total earnings for some workers, but if you exclude bonuses, pay in real terms is falling at its fastest rate in over a decade.”

Introduction: UK jobless rate rises as basic pay lags inflation

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

The UK’s unemployment rate has risen, as regular pay continues to fall behind inflation at the fastest rate in a decade.

The latest jobs data, just released, show that the unemployment rate rose to 3.8% in the three months to April, as more people look for work.

That’s up from 3.7% in the quarter to March (which was the lowest in 50 years), and may show the UK’s jobs recovery is softening.

⚠️ First uptick in the UK unemployment rate since the Covid crisis. May be a blip… but the message is clear: the easy part of the UK economic recovery is behind us & things are starting to turn. Watch the UK closely… will be a canary in the coalmine for a global downturn $GBP pic.twitter.com/4J1lb8eFsc

— Viraj Patel (@VPatelFX) June 14, 2022

Basic pay continues to lag behind rising prices too, as the cost of living crisis hits households.

Regular pay rose by 4.2% in the February-April quarter, well behind inflation which hit 9% in May.

Total pay, including bonuses, was much stronger though — up 6.8% thanks to surging bonuses in the financial sector.

So in real terms (adjusted for inflation), total pay grew by 0.4% in the quarter while regular pay tumbled by 2.2% on the year.

That’s the biggest drop in real regular pay since late 2011, adding to pressure on families struggle to pay food and energy bills.

After taking inflation into account, average pay including bonuses rose 0.4% in the year to February to April 2022, thanks to strong bonuses.

However, excluding bonuses, pay fell by 2.2% in real terms https://t.co/iB6VqmLG3N pic.twitter.com/LJL6vVrPQF

— Office for National Statistics (ONS) (@ONS) June 14, 2022

Firms are still taking on staff, though. The number of people on company payrolls increased to a fresh record high, up 90,000 in May to 29.6 million.

The number of job vacancies in March to May 2022 rose to a new record of 1,300,000. However, the rate of growth in vacancies continued to slow down.

Redundancies decreased on the quarter and are at record low levels, as firms hold onto staff.

But, the employment rate is still below pre-pandemic levels, due to the drop in self-employment in the pandemic.

More details and reaction to follow…

Also coming up today

Stock markets are in a very nervous mood, after Wall Street fell into a bear market last night.

The S&P 500 index tumbled almost 4% and closed over 20% below its record high, while US government bond prices surged, on growing expectations that the US Federal Reserve could lift interest rates very sharply on Wednesday.

A 75 basis-point rise , triple the usual move, is now seen as an option to get a grip on inflation.

This has intensified fears that central banks could push economies into recession, which has driven up the yield on government bonds dramatically.

Asia-Pacific stock markets were pounded overnight, with Australia’s main index dropping almost 4% and Japan’s Nikkei shedding 1.5%.

European stocks are due to open a little higher after Monday’s rout, but it could be another volatile day.

Bonds yesterday. Here’s hoping exhaustion sets in and they spend the day sleeping it off. So far, a nervous-looking Turnaround Tuesday…2s and 10s together at 3.34%, S&P futures up 1%, dollar a little softer. UK jobs and US PPI ahead. pic.twitter.com/Tks2BdxBZ5

— kit Juckes (@kitjuckes) June 14, 2022

The agenda

  • 7am BST: UK unemployment report for May
  • 10am BST: ZEW index of Gemran investor confidence
  • 10.30am BST: The Business, Energy and Industrial Strategy (BEIS) Committee holds a hearing into the UK’s flight cancellations
  • 11am BST: NFIB small US business optimism index
  • 1.30pm BST: US PPI index of producer prices

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