UK wage growth accelerates as employment rate hits record high - business live
Rolling coverage of the Federal Reserve decision on US interest rates, and Jerome Powell's first press conference as Fed chair
- Powell: Trade is becoming a risk to the outlook
- Newsflash: The Fed has hiked US interest rates to 1.75%
- Fed: The outlook has strengthened
- Fed sticks with forecast for three hikes this year, not four
Earlier:
8.25pm GMT
And finally.... Wall Street has closed sightly in the red after Jay Powell's debut press conference.
The Dow Jones industrial average ended 45 points lower at 24,682, a dip of nearly 0.2%.
"Today's FOMC meeting confirms the scenario we have been advocating for some time, that 'monetary policy normalisation' is well and truly underway.
As expected Powell committed to raise rates, indicating strong global economic growth, while highlighting that the Federal Reserve is seeking a 'middle ground' agenda.
8.16pm GMT
Ranko Berich, head of market analysis at Monex Europe, says Jerome Powell avoided any shocks today.
Indeed, the new Fed chair maintained the same cautious approach as his predecessor, Janet Yellen:
"Jay Powell's first Fed presser went more or less as expected, with the FOMC raising rates and making some vague hawkish noises about the future while maintaining its cautious approach to policy tightening.
"As with his testimony to lawmakers, the Fed Chair stuck to the "Powell Doctrine" of studiously avoiding commenting on political issues. If the Fed will react to trade or fiscal policy, it will do so only once it is looking directly at the economic effects of those policies.
8.12pm GMT
Bloomberg's Luke Kawa has summed up Jerome Powell's approach rather well:
Jerome Powell's Fed:
"Speak briefly, and carry a big balance sheet."
7.31pm GMT
That's it! Jerome Powell has wrapped up his first press conference as Fed chair after 45 minutes, around 15 minutes quicker than expected.
He rattled through the questions swiftly, giving sharp and clear answers - without any diversions into deep economic theory.
Didn't learn too much from Powell. Tarrifs vaugly in the radar, he is surprised wages have not risen more and will see the labor market as tight if they do, he doesn't think the fed has "tolerated" the last five years of inflation undershoot.
And that's that. 45 minute presser from Powell. Stocks back in green. Thought he was fairly forthcoming, as much as you can expect from a Fed chief, and didn't make waves with any major surprises for the market.
No blunders from Powell in his first press conference. Market excitement will have to wait for another day.
Powell is good at seeming to answer questions directly while giving away very little.
"We don't have the ability to see that far into the future." Love that a Fed chairman willing to say that!
On financial conditions, Chair #Powell says finanical stability vulnerabilities are moderate. He says borrowing is elevated but default rates are low. He adds some asset prices are elevated vs history but not in housing which he says is key. Moderate is his buzz word. #fomc #fed
7.19pm GMT
Powell sways elegantly to avoid a potential curveball on political issues.
He says he's not kept awake at night, worrying whether he's free to raise rates ahead of the midterm elections this autumn.
Powell says he's not worried about raising interest rates as the midterm elections approach and possible White House pressure, says "that doesn't keep me awake at night. We don't consider the election cycle."
7.15pm GMT
On wages, Powell says he's surprised that wages haven't risen faster, given the pace of the economic recovery.
Powell: labor market getting tight "when we do see more meaningful upward move in wages." Implies he doesn't think it's tight now. Interesting.
Fed Chair Powell says he has "been surprised" wages aren't increasing faster.
To summarize:
Fed sees higher growth, lower unemployment, but still just 1.9% inflation this year and 2.0% next.#jobs #wages
7.13pm GMT
Q: What impact would a US-China trade war have on the global economy?
Powell replies that trade wars are a "low profile risk" that has become "a more prominent risk to the outlook".
"We don't do trade policy here at the Fed" -- Powell
7.09pm GMT
Powell says the Fed expects Donald Trump's tax cuts will have a "meaningful" impact on the economy, although its full effect isn't clear.
POWELL: TAX-CUT EFFECTS ON ECONOMY ARE VERY UNCERTAIN
so are rate hikes
Listening to Powell account for the SEP is quite instructive. It would appear that the Fed believes that tax cuts will result in a decent sugar high in growth, then dissipate quickly with little improvement in productivity associated with late cycle fiscal boost.
7.07pm GMT
Ooooh. Asked about financial risks, Jerome Powell warns that the prices of some assets are 'elevated', including shares.
Fed Chair Powell on the stock market:
"In some areas, asset prices are elevated"
He says "equity prices and commercial real estate prices in some markets" are elevated, but "we don't see it in residential housing, which is key" #stocks
Powell on financial stability risks: overall just moderate -- household and financial system leverage modest, funding not too short term, corporate leverage a bit elevated, asset prices in equities and CRE elevated. Capital and liquidity up, and corporate defaults only up a bit.
6.59pm GMT
Q: What impact might the US government's tariffs have on American monetary policy?
Fed chair Jerome Powell says that a number of FOMC committee members brought up the issue of tariffs at this week's meeting.
6.52pm GMT
Q: Would you like to hold more Fed press conferences?
Powell says he is considering whether to hold a press conference after every FOMC meeting (the committee meets eight times a year, but only hold a press conference four times).
6.49pm GMT
Asked about the neutral rate of interest, Powell says he and his colleagues believe is is still "quite low"
FED'S POWELL SAYS FOMC STILL SEES NEUTRAL RATE OF INTEREST AS QUITE LOW
6.48pm GMT
Jerome Powell suggests we shouldn't get too fixated on the dot-plot forecasts of where each Fed policymaker believe interest rates will be in future.
We only had one decision today, and that was to raise the Funds rate, he says. No-one voted on what the 'mean' projection should be.
Powell's being mean to the median.
6.45pm GMT
Here's a clip of Powell's opening statement:
Jerome Powell: "We decided today to raise the target rate for the federal funds rate by 1/4 percentage point, bringing it [from] 1.5% to 1.75%. This decision marks another step in the ongoing process of gradually scaling back monetary policy accommodation" https://t.co/IWNsM1OCoH pic.twitter.com/n2HCex8Jhe
6.43pm GMT
Q: How concerned would you be if US inflation rose over your 2% target?
Powell says the Fed would be concerned about "sustained deviation" above or below its target.
6.42pm GMT
We're swiftly onto questions.
Q: The Fed has raised its growth forecasts, and sees unemployment lower than before, but hasn't changed its forecast for inflation much. Why?
6.37pm GMT
The new Federal Reserve chair, Jerome Powell, has arrived for his first press conference since succeeding Janet Yellen.
He confirms that the Federal Open Market Committee voted to raise US interest rates today. He calls it another another step in the process of gradually scaling back accommodative monetary policy.
6.32pm GMT
Nancy Curtin, chief investment officer at Close Brothers Asset Management, says today's rate hike was a "fairly straightforward decision":
The US economy seems to be in somewhat of a sweet spot, with a synchronised global economy, a weaker dollar, fiscal expansion and the prospect of increased business investment all supportive of growth. Wholesale tax reform should filter through more strongly into the economic data ahead, providing increased growth momentum. At the same time, inflation is showing signs of getting close to the Fed's goal, and spare capacity in the labour market is declining.
The Fed's decision to raise interest rates by 25bp today was widely expected but some investors may have been caught off-guard by the degree to which Fed officials increased their projections for future interest rate hikes. The median projection for the fed funds rate at the end of 2019 is now 2.75-3.00% - exactly in line with our own forecast, which until recently was at the hawkish end of the spectrum.
Today's decision to raise the federal funds rate to 1.50% - 1.75% was unanimous; the two dissenters at the December meeting, Charles Evans and Neel Kashkari, are not voting FOMC members this year and their replacements are more hawkish.
The Fed's more hawkish tone could simply be a result of new Chairman Powell's communication style compared to Janet Yellen, or it could mean the Fed believes recent economic data signal a strengthening economy, tighter labor market, and higher inflation.
But if a few data points since the last meeting were enough to change the Fed's plans, they could change just as easily in the future."
6.27pm GMT
Here's Nell Henderson of the Wall Street Journal on those dots...
New Fed dot plot shows median still for 3 rate hikes this year, but more (7/15) officials now favor 4 or more hikes this year. And dots become much more dispersed through 2020 than before. pic.twitter.com/nHF3jAqyjO
6.25pm GMT
Shares are pushing higher on Wall Street, as traders react to the Fed announcement.
The Dow is now up 180 points, or 0.75%, having been around 135 points higher earlier.
Stocks extend gains after Fed hikes rates https://t.co/D2lb2alYQd pic.twitter.com/qklhFpU7Lv
6.24pm GMT
Here's the latest 'dot plot' from the Federal Reserve's policymakers, showing where they expect interest rates to be at the end of 2018.
Dot Plot after hike. Policy makers expect two more rate increases this year #fed pic.twitter.com/tcrCYSmRnH
6.11pm GMT
The Fed has also signalled its confidence in the strength of the US economy.
In a statement announcing the rate hike, it says:
Information received since the Federal Open Market Committee met in January indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderate rate. Job gains have been strong in recent months, and the unemployment rate has stayed low.
The economic outlook has strengthened in recent months.
6.06pm GMT
Looking further ahead, the Fed is more hawkish about how fast US interest rates will rise:
Fed summary of economic projections and dot plot for next two years hawkish. Just narrowly averted lifting rate forecast for 2019 to 4 hikes. That will likely now happen at the June meeting.
FOMC dot plot sees three total hikes in 2018, but now sees terminal rate at 3.4% in 2020 as opposed to 3.1%. Slightly more hawkish tilt than Dec17 SEP; basically a wash for $DXY.
6.05pm GMT
The Fed is sticking with its forecast that it will raise interest rates three times in 2018 (including today's hike, of course!).
Fed raises rates as expected. No dissents. Dot plot suggests two more rate hikes this year. Not three more.
6.00pm GMT
NEWSFLASH: The Federal Reserve has raised US interest rates.
The Fed's Open Market committee has voted to hike the target for the Federal Funds rate, to 1.5% to 1.75% - up from 1.25% to 1.5%.
5.58pm GMT
A quick check at the markets - the Dow is up 0.5%, or 134 points, at 24,861 as Wall Street braces for the Federal Reserve announcement....
The US dollar is down around 0.5% against the pound, at $1.407.
5.56pm GMT
The Fed decision is imminent...
We're five minutes away from a new Fed policy statement (very likely raising interest rates a quarter-point) and economic projections. Jay Powell (henceforth, JPow) takes the stage for his first news conference half an hour after that.
5.42pm GMT
Tension is mounting, with less than 20 minutes to go until the Federal Reserve decision hits the wires.
"The Federal Open Market Committee are widely expected to raise the target range for the federal funds rate later today.
Last December, the median forecast for the funds rate by year end was 2.1% which implied three hikes. But since then, hawkish rhetoric from the Fed has swayed market expectation towards four rate hikes in 2018.
5.11pm GMT
As investors await the Federal Reserve decision, European markets have ended on a mixed note.
With Wall Street now in positive territory, most have come back from their worst levels, but uncertainty over the Fed's future interest rate policy meant caution was the watchword. Meanwhile the problems with UK retailers put the FTSE 100 under added pressure. The final scores showed:
3.33pm GMT
The dollar has dipped ahead of the Federal Reserve meeting, despite the prospect of a rate rise announcement. Connor Campbell, financial analyst at Spreadex, said:
In a move that surprised no-one the Dow Jones was incredibly reticent to do much after the bell rang on Wall Street, as investors eye the month's Fed meeting.
The Dow dipped 0.1% this Wednesday; enough of a drop to suggest some pre-Fed fretting, but nothing to really tip its hand as to what it's are expecting from the March statement. The dollar was more interesting in that regard. The greenback fell half a percent against the pound, 0.4% against the euro and 0.2% the yen, hinting that investors are perhaps a tad worried that Jerome Powell, in his first outing as the central bank's chief, won't be as hawkish as they want.
2.38pm GMT
More signs of strength in the US economy ahead of the Federal Reserve rate decision.
Home sales jumped 3% in February to a seasonally adjusted annual rate of 5.54 units, according to the National Association of Realtors. Analysts has expected a rise of just 0.5%. But there is a shortage of available homes which is pushing up prices and helping to price first time buyers out of the market. NAR chief economist Lawrence Yun said sales were uneven across the country but did increase nicely overall:
A big jump in existing sales in the South and West last month helped the housing market recover from a two-month sales slump,. The very healthy US economy and labor market are creating a sizeable interest in buying a home in early 2018. However, even as seasonal inventory gains helped boost sales last month, home prices - especially in the West - shot up considerably. Affordability continues to be a pressing issue because new and existing housing supply is still severely subpar.
1.41pm GMT
Meanwhile Facebook shares are down another 2.5% at the open, in the wake of the Cambridge Analytica controversy.
Here is our latest story:
Related: Facebook scandal: I am being used as scapegoat - academic who mined data
1.35pm GMT
Ahead of the Federal Reserve decision - with rates expected to rise and investors seeking hints about further increases this year - Wall Street has slipped back at the open.
With technology stocks still under pressure, both from EU tax plans and the fallout from the Facebook controversy, the Nasdaq Composite has opened down 0.21%.
Markets are pricing in a roughly 90% chance of a hike this week, the first of three or four anticipated this year. So the focus is on the dot plot and the accompanying language from chair Jay Powell. For risk, markets will want the Fed to hold off indicating 4 hikes in 2018 but keep up its confident assessment of the economy. This will in large part depend on how policymakers assess inflationary pressures - if they think inflation is coming they might accelerate the path of rate hikes. But there is a much bigger risk that the Fed sticks to three in 2018 but raises forecasts for 2019 and that could knock equities and give a boost to USD more than indicating four hikes in 2018 might...
Since the last meeting in December inflation has picked up but the pace has not really accelerated beyond the most bullish scenarios seen already...
12.53pm GMT
The jump in UK wage growth means interest rates may rise soon, argues our economics editor Larry Elliott.
He writes:
Higher interest rates from the Bank of England have moved a decisive step closer after the latest official figures showed earnings growing at their fastest rate in more than two years.
The latest snapshot of the labour market from the Office for National Statisticsshowed that a record high level of employment and a drift from part-time to full-time work pushed up wages in the three months ending in January.
Related: UK earnings growing at fastest rate in more than two years
12.30pm GMT
Over in parliament, the prime minister has hailed today's jobs figures.
Theresa May points out that employment is at a joint record high, the unemployment rate hasn't been lower since 1975, and economic inactivity is at a record low.
Theresa May understandably hits Corbyn with the mostly good jobs numbers right at the end, which doesnt leave him chance to reply that the unemployment numbers have actually gone up 24,000 over the quarter
12.05pm GMT
Dr Carole Easton, chief executive of Young Women's Trust, is concerned that younger female workers aren't getting enough help to join the jobs market.
She points out that unemployment among women aged 16-24 rose by 21,000 in the three months to January. That means 151,000 young women are now unemployed and a further 340,000 young women are economically inactive and not in full-time education.
"21,000 more young women are unemployed, meaning nearly half a million are out of work. The Government must help young women into jobs to benefit individuals, businesses and the economy.
"Young women are telling us they want to work but they are getting shut out of the jobs market by employer discrimination, low pay and unaffordable childcare.
11.36am GMT
Interestingly, the number of people in work and the number counted as unemployment in Britain both rose in the last quarter.
You might expect them to move inversely - but instead, there was a fall in the number of 'economically inactive' citizens, suggesting people are being lured back into the jobs market.
These figures indicate that, in the face of recruitment difficulties, including as a result of a large fall in net migration of EU citizens, employers are hiring people who have not been actively seeking work.
This might be seen as a positive sign, but this pool is likely to be limited"
"Interesting picture of an increase in both #employment and #unemployment in the three months to January 2018' - Our @Heather_Rolfe reaction on the latest @ONS UK Labour Market #stats is out now - Read it here in full: https://t.co/0S7hc4mQ6Q pic.twitter.com/RQTq4MkNFu
11.00am GMT
As usual, Britain's unemployment report has split Westminster - with the government pointing to what's going well, and the opposition focusing on the problems.
"And from next month, we'll be taking thousands more people out of paying tax and also increasing the National Living Wage, benefiting those on the lowest pay and making sure they keep more of what they earn.
"In fact by raising the National Living Wage we have ensured that the lowest earners have seen their wages grow by almost 7% above inflation since 2015."
"With eight million people in working households living in poverty and the cost of basic essentials remaining high, the Spring Statement was a missed opportunity for the Government to take the urgent action needed.
"The Government has also failed to close the employment gap faced by women, disabled people and BAME groups, who have too often borne the brunt of austerity cuts."
10.36am GMT
Ian Stewart, chief economist at Deloitte, has spotted another interesting angle in today's jobs report: More people are quitting their jobs to move to another company.
That could drive wages growth higher, he reckons, as employers are forced to fight for labour.
"The post-Brexit squeeze on consumer spending power is easing. Low unemployment, a slowing flow of overseas workers into the UK and high levels of job vacancies are raising wage pressures and boosting job moves.
"The number of people resigning from one job to move to another fell in the wake of the financial crisis, but is now running at its highest level since 2001.
10.29am GMT
The Resolution Foundation has crunched today's labour force statistics, and calculated that Britain's pay squeeze is finally ending.
The think tank says that the official confirmation will come in a month's time, when the ONS publishes the unemployment figures for November-February.
Today's figures show that real average weekly earnings fell by 0.2% in the three months to January, fell by 0.6% in the public sector, but were flat at 0 per cent in the private sector.
However, the Resolution Foundation pay projection shows that earnings growth is set to have returned to 0.1% overall, and 0.2% in the private sector, in the three months to February.
A fall in inflation and pay growth of 2.6% means that next months' figures will signal an end to the pay squeeze pic.twitter.com/sOMUuDV259
"Britain's 12-month pay squeeze has finally ended, though public sector workers will have to wait until new pay settlements are agreed across the NHS, schools, the police and other parts of the public sector.
"While it's a relief that pay packets are no longer shrinking, the outlook for anemic pay growth remains a huge living standards concern. Average pay is still lower than it was a decade ago, and an entire generation of young workers are still yet to experience the 3-4 per cent pay rises that were once the norm."
10.15am GMT
Factory workers and builders are enjoying decent pay rises, says Geraint Johnes, research director at the Work Foundation and Professor of Economics at Lancaster University Management School.
He's hopeful that the fall in real wages will soon end, especially as the UK economy is still creating jobs..
"Encouraging news on pay includes the 2.8% rise in total pay on the preferred measure, this being driven by gains in manufacturing and, particularly, construction.
Alongside the drop in consumer price inflation announced yesterday, this heralds an early end to the squeeze on real earnings. Meanwhile, the 182k rise in full-time employees in employment figure signals a labour market that continues to grow."
10.06am GMT
Despite the pick-up in wages in recent months, UK workers are still poorer than before the financial crisis once you adjust for inflation.
The Office for National Statistics explains that in real terms:
9.54am GMT
Britain's unemployment rate has fallen back to 4.3%, its lowest level since 1975.
However, the number of people out of work has risen, by 24,000 to 1.45 million in the three months to January 2018 when compared with August to October 2017.
9.45am GMT
In another boost, Britain's employment rate has risen to 75.3% in the three months to January.
That's up from 74.6% a year ago, and the joint highest on record.
The number of people in work has reached a record high of 32.2 million, said the Office for National Statistics.
Today's @ONS statistics show that the unemployment rate is at the joint lowest level since 1975 #StrongerEconomy pic.twitter.com/Oe5LVV412p
9.36am GMT
Breaking: Britain's cost of living crisis is easing, as wages accelerate and close the gap with inflation.
Basic pay rose by 2.6% per year in the three months to January, up from 2.5% in the three months to December 2017.
Latest estimates show that average weekly earnings for employees in Great Britain in real terms (that is, adjusted for price inflation) fell by 0.2% excluding bonuses, but were unchanged including bonuses, compared with a year earlier.
Earnings for employees including bonuses increased by 2.8% on the year in cash terms but were unchanged after taking inflation into account https://t.co/eO0xGRtutP pic.twitter.com/8hCPzwTjHx
9.28am GMT
Hannah Uttley of the Daily Mail sums up the scene:
Another gloomy day for the high street. Carpetright seeks to close stores and secures emergency loan. New Look meeting to agree shop closures with creditors today. B&Q owner Kingfisher's profits and LFL sales down. Menswear retailer Moss Bros issues profit warning. Oh dear.
9.24am GMT
Hundreds of jobs are also at risk at UK retailer New Look.
New Look's creditors are meeting today to vote on a rescue deal to help its avoid administration.
9.07am GMT
Mothercare, the mother and baby chain, has also come under fierce pressure in recent days.
"Mothercare expects those discussions to conclude before 17 May 2018, the scheduled date for the announcement of its preliminary results, and Mothercare's lenders have agreed to defer the testing of our financial covenants due on 24 March 2018 accordingly. We will make further announcements as and when appropriate.
As previously indicated, we are also exploring additional sources of financing to support and maintain the momentum of our transformation programme and we are engaged in preliminary discussions on securing such additional financing.
8.54am GMT
We also have news from another struggling retailer, Carpetright.
"The aggressive store opening strategy pursued by the Company's previous leadership has left Carpetright burdened with an oversized property estate consisting of too many poorly located stores on rents which are simply unsustainable.
The Company has worked hard over recent years to address this legacy issue and reduce the size of its property estate, however many of these poor performing stores still have long leases to run, which has limited our ability to exit a meaningful number in the short-to-medium term.
8.42am GMT
Moss Bros's CEO, Brian Brick, warns that 2018 will be a tough year for retailers:
In common with many UK retailers, the year ahead looks like being a very challenging one and we have taken action early to be sure we protect the underlying strength of the business. We do believe continued investment is essential to ensure we retain a sustainable point of differentiation and that we leverage our distinct position on the high street."
8.41am GMT
Moss Bros has hit shareholders with its second profits warning of the year.
8.37am GMT
DIY chain Kingfisher has sent a chill through Britain's retail sector by reporting a fall in earnings, and warning that the UK market is tough.
"Our performance this year has been mixed, however, with solid growth at Screwfix and Poland, offset by continued weaker sales in France and some business disruption, principally reflecting product availability and clearance.
We are acting on the causes of this disruption, however next year will be another big year in our transformation plan. The pace of change is quick and impactful but necessary as we build the new ONE Kingfisher engine to support our ambition to be the leading home improvement company, based on putting customer needs first.
Shares in B&Q-owner Kingfisher slide after it says the U.K. outlook is more uncertain. pic.twitter.com/FdRfPItPRh
8.24am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Two big events will keep traders on their toes today.
Markets are almost certain that the Fed will be raising interest rates by 25 basis points later today, suggesting that a rate hike has been already priced in.
Instead, the focus will be on the accompanying statement, economic forecast, the dot plot and the Q&A session with Fed Chair, Jerome Powell.
Continue reading...