UK jobs market 'loses momentum' as real wage squeeze continues – as it happened

Graeme Wearden (until 2.30 pm) and Nick Fletcher

from on 2017-11-15 17:45 (#380X8)

All the day's economic and financial news, including rolling coverage of the latest UK labour market report

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5.45pm GMT

Continuing strength in the euro, a falling oil price and a decline in US markets, have combined to pull most European shares lower. On Wall Street, worries about a Chinese slowdown and concerns over the Republicans successfully implementing their tax plans were additional negative factors. The final scores in Europe showed:

5.08pm GMT

Markets may be lower but could be supported at these levels. Chris Beauchamp, chief market analyst at IG, says:

Stocks are falling, volatility is on the up, China's economic growth appears to be weakening and we even have a military coup to deal with. On the face of it, the situation would be ripe for a big selloff in equity markets, but this is not 2008 or even 2015. Below the surface some sectors, such as utilities, are recovering, while in the UK and Europe markets are off their lows.

It is options expiration week, and a look at positioning through put/call ratios suggests sentiment has become excessively bearish. Plus, Thanksgiving is on the horizon, and the week before this all-American holiday tends to be a good one. The bears can almost taste victory, but I suspect that 2017 will work its magic once again and the dip buyers will have their way.

3.59pm GMT

The concerns about a rise in US crude stocks last week proved well founded.

They climbed by 1.85m barrels compared to earlier forecasts of a 2.2m drop. Gasoline stocks rose by 894,000 barrels as opposed to the expected 0.9m decline.

3.32pm GMT

US markets remain in negative territory although the Dow Jones Industrial Average is off its worst levels, down 131 points or 0.5%. Connor Campbell, financial analyst at Spreadex, said:

The markets looked pretty bloody this Wednesday, with the euro once again the only real winner.

With US investors already fretting about the Republican tax reforms - namely the party's ability to push them through after they failed so spectacularly on healthcare - a weak pair of inflation and retail sales readings didn't really do much to help matters. The former came in as expected at a measly 0.1% in October, down from 0.5% in September, while the latter arrived at a better than forecast, but still miserly, 0.2%.

3.19pm GMT

Back in the UK, and sales of used cars fell over the summer, according to the industry body. Julia Kollewe writes:

The Society of Motor Manufacturers and Traders said today that the used car market declined for a second quarter, with sales down 2.1% between July and September from a year ago. About 2.1m secondhand cars changed hands.

Superminis are still popular, making up a third of sales. Along with SUVs they were the only categories to show growth. Silver remains the most popular used car colour, closely followed by black.

Sales of hybrid and electric cars rose 17% to 25,196 units (electric cars alone urged 66.4%). While petrol sales fell 6.5%, demand for diesels rose 4.2% - in stark contrast to new diesels where sales have fallen sharply.

After a bumper first quarter the market remains at record levels, with more than 6.3m buyers opting for a used car in the first nine months of this year, up 0.1% on the same period last year.

3.04pm GMT

The retail sales and inflation figures are likely to add more fuel to the fire in terms of a US rate rise next month, analysts believe.

But there is some uncertainty as to the future trend of borrowing costs, especially with a new Fed chair for the new year and a change in the composition of the decision making panel. Dennis de Jong, managing director at UFX.com, said:

The recently released figures from the US Bureau of Labor Statistics show that while inflation is creeping up as anticipated, it appears reluctant to move through the gears.

What this rising inflation will provide, however, is yet another tick on the checklist, as the Fed looks increasingly likely to raise interests rates next month.

A pick-up in core inflation and solid retail sales suggests investors may still be too cautious about the rate hike outlook for the next year.

Falling core inflation has seen markets remain fairly cautious on the outlook for interest rates through much of this year. However, the latest data for October saw core CPI expectedly rise to 1.8% year on year, providing some tentative evidence that inflation may be finally starting to turn a corner. Headline CPI dipped back slightly to 2% as gasoline prices re-adjust following the hurricanes a couple of months ago.

2.53pm GMT

Earlier there was some US data, showing both retail sales and inflation on the rise, albeit a very small increase in the latter

An increase in car purchases helped retail sales rise to a better than expected 0.2% in October, offsetting a decline in demand for building materials. Economists had forecast no change. Meanwhile the September figure was revised upwards from 1.6% to 1.9%.

Sellers immediately attacked the dollar on Wednesday after U.S. consumer prices marginally increased by 0.1% in October - the smallest gain witnessed in three months.

Although the 0.1% increase in consumer prices was in line with market expectations, it continues to highlight how stubbornly low inflation in the United States remains a recurrent theme. While it is widely expected that the Federal Reserve will raise interest rates in December, the future path of rate hikes beyond 2017, is open to discussion amid low inflation concerns. On a positive note, U.S. retail sales unexpectedly rose 0.2% in October which is likely to boost sentiment towards the U.S. economy and offer some support to the tired dollar.

2.41pm GMT

US markets are on the slide again, hit by a falling oil price and continuing worries about the ability of the Republicans to achieve their proposed tax cuts.

West Texas Intermediate - the US benchmark - is down 0.9% at $55.19 a barrel after the International Energy Agency issued a gloomy outlook on the prospects for global demand for oil. Later come the latest US crude inventory figures, with investors worried they might show an increase.

2.17pm GMT

Back in London, a Bank of England deputy governor has insisted that wages should rise in 2018 as low unemployment forces bosses to pay more for labour.

Obviously there's not much sign of this happening yet, given today's lacklustre wage growth.

Deputy Governor of the @bankofengland Ben Broadbent - Brexit and Interest Rates - @LSEEI pic.twitter.com/CQC7SBSC88

"Several commentators have questioned the MPC's central prediction that wage growth will rise next year. Some have gone further and pronounced the death of the Phillips curve.

There are always risks to any forecast. But the latter claim, at least, is premature."

BoE's Broadbent: Brexit-Linked Fall In STG Is Why We Have Negative Real Wage Growth - RTRS

2.00pm GMT

Breaking away from UK unemployment briefly, there are three important developments in Greece.

First, the Greek government has launched a a30bn debt swap, asking investors to hand over existing bonds in return for new debt.

#Greece's Public Debt Mngnt Agency facilitates an important a29.7bn bond swap operation.
New bonds to have far longer maturities: 5, 10, 15, 17 & 25 years.#ESM

1.32pm GMT

Despite what the chancellor's tweeted (see earlier) UK unemployment isn't actually a record low.

The current jobless rate of just 4.3% is the lowest since 1975; in early 1974 it was just 3.6%.

@graemewearden re the chancellor's tweet you posted - today isn't the lowest unempt level ever 1,425,000 vs 6months in 2004 June-nov
1,423
1,405
1,401
1,397
1,407
1,423https://t.co/oib31tXf5i

1.02pm GMT

In another significant development, The Young Women's Trust has warned an extra 42,000 young people dropped out of the labour market and the education sector in the last three months.

This group became economically inactive, and were not in education or training either - a worrying sign.

"42,000 more young people are now economically inactive and out of education - a dramatic increase on the last quarter.

"Young women in particular are telling us they want to work but hundreds of thousands are getting shut out of the jobs market, including by a lack of convenient childcare and support. While the Government focuses on reducing its unemployment figures, 343,000 young women who are not included in the numbers are being left jobless and forgotten.

12.45pm GMT

Philip Hammond, the chancellor, has just welcomed the drop in unemployment and the rise in productivity seen today.

Unemployment at record low and productivity now growing at fastest rate since 2011. More still to do at Budget to lock this progress in.

12.10pm GMT

The number of people from other EU countries working in Britain has hit a record high, up by 112,000 in the last year.

That takes the total number of EU nationals to 2.38m. There are also 28.55m UK nationals in work (up 183,000 in the last year), and 1.21 million non-EU workers (down by 23,000).

The number of EU nationals working in UK has reached a new record level: 2.38 million employees, from July to September this year.

The figures from the Office of National Statistics show that the number of Polish and other east European nationals working in Britain has dropped for the first time in more than 10 years, down from 1,054,000 in the summer of 2016 to 1,035,000.

The number of Romanians and Bulgarians working in Britain has, however, continued to rise, from from 257,000 to 347,000 - a 90,000 increase that accounts for the majority of the overall increase in the last year.

11.40am GMT

With wages lagging inflation, struggling families may be forced to hit their credit cards hard this Christmas.

Positive Money's director Fran Boait hopes that Philip Hammond can help next week - especially as the Bank of England has raised the cost of borrowing:

"As real pay continues to fall, households are being forced to borrow ever-greater amounts to make ends meet. The economy is being kept afloat on the back of families' credit cards, at increasingly high interest rates.

In the budget later this month, the Chancellor must act to boost investment and deliver a sustainable boost to incomes, before it's too late. We've had a rates rise - now it's time for a pay rise."

11.14am GMT

The Resolution Foundation, the UK think tank, fears that Britain's jobs market is losing momentum.

They are concerned by the drop in employment over the summer, as it could show the labour market is plateauing.

The biggest pay squeeze is taking place in other service sectors (-2.7%), public administration (-2.2%) and real estate (-1.9%), while pay growth is strongest in agriculture (+3.9%) and in support services (+0.8%).

"After years of impressive growth, there are signs that the labour market may be losing momentum.

"The still strong picture on employment still refuses to have any meaningful impact on wage growth, as Britain's pay squeeze is getting deeper.

The continuing pay squeeze means that there has been little progress in returning to pre-crisis levels of pay this year. We're still 16 down from 2008 peak. pic.twitter.com/1n9eaogRWV

The pay squeeze is being felt across the economy. The public sector is being squeezed harder than the private sector, with only agriculture, admin, finance and the arts escaping pic.twitter.com/9YcjtG1G43

In the short-run this pay squeeze is about higher inflation. However, in the long-run only productivity improvements can address sluggish nominal wage growth pic.twitter.com/vFtxRnwOpJ

11.09am GMT

Amid the real wage gloom, there is an encouraging sign..... Britain's economy appears to have become more productive.

The ONS estimates that productivity per hour grew by 0.9% in the third quarter of 2017.

"For too long the UK has been lagging behind, with a lack of higher skills limiting the agility and adaptability needed to drive organisations forward. Stagnant productivity is a significant barrier to growth at an uncertain time when we need to ensure the stability of our economy.

"Organisations now need to keep this up. With technology advancing at a rapid rate, and businesses looking to automate where they can, low-skilled jobs are increasingly under threat. It's crucial that organisations invest in training their staff to build up essential technical and soft skills to future-proof them against changes in the political, economic and technological environment."

10.54am GMT

There's something for everyone in today's jobs report.

"The strength of the economy is driving an increase in full-time, permanent jobs and a near-record number of people are now in work thanks to the Government's welfare reforms.

"When unemployment fell to 5% early last year, many people thought it couldn't get much lower, and yet it now stands at 4.3%."

"Today's stats are further evidence of Tory economic failure, only a week out from their next Budget.

"Both employment and real wages are falling while the price of household essentials balloons, leaving millions of people worse off than they were in 2010.

10.42am GMT

Britain is now suffering its second wage squeeze since the financial crisis, as this chart from the FT shows:

In UK, in real terms, adjusted for inflation, wages dropped 0.4% (incl. bonuses), dropped 0.5% (excl. bonuses), chart @fastFT https://t.co/F3urfnRnEh pic.twitter.com/5Sr6Mp7Lal

10.32am GMT

How can unemployment and employment both have fallen, I hear you cry.

The answer is that the number of adults classed as 'economically inactive' has gone up.

"The latest labour market statistics show unemployment continuing to fall - by some 59000 between the second and third quarters of this year. The unemployment rate now stands at 4.3%.

The most recent fall, however, is due largely to a large increase in the number of people deemed economically inactive.

Big surge in economically inactive (working-age) also linked to jump in 'students' up 19% q/q and 22% y/y in Q3. Students highest level in over 4 years.

Meanwhile, part-time employment has risen, with an increase of 18000 part-time employees and 45000 part-time self-employed. Inasmuch as it continues a trend towards greater casualisation and insecurity in the labour market, this should be noted as a cause for concern. Overall the level of employment has fallen.

10.18am GMT

Britain's ongoing wage squeeze is a "huge body blow" to consumers as they try to make ends meet in the run-up to Christmas, says Maike Currie of Fidelity International

She fears that real wage growth will remain "elusive" for some time:

With a number of factors keeping a lid on our earnings - from people working flat out in the gig economy yet still struggling with paltry pay, more and more people in self-employment, falling unionisation, automation and technology substituting man for machine, this is unlikely to change any time soon."

10.13am GMT

Nick Macpherson, formerly the top civil servant at the Treasury, fears that the UK labour market is cooling....

Small but perceptible signs UK laour market may be beginning to turn after very good run. InactivityaVacancies, employment and real wagesa

10.07am GMT

Here are some charts showing the state of the UK labour market:

9.53am GMT

This chart from the Office for National Statistics shows how wage growth has struggled to get much above 2% this year.

Jul-Sep 2017 was the sixth three-month period in a row where earnings including bonuses fell in real terms https://t.co/vYgJXaCR8u pic.twitter.com/gkSUfDgoCd

9.44am GMT

The pound has risen slightly, as City traders welcome the pick-up in wage growth in the last quarter.

Latest data in Britain:

- Unemployment rate is 4.3%
- Holds at lowest since 1975
- Number in work falls by 14,000
- First decline in 13 months
- Wage growth just above 2%
- Far below rate of inflation
- Pound rises slightlyhttps://t.co/a9qPI1vM5r pic.twitter.com/a8WUPXISGS

9.39am GMT

Breaking! The number of people in employment across the UK has fallen, for the first time in nearly a year.

There were 32.06 million people in work in July-September, which is a 14,000 drop on the previous quarter.

*U.K. 3Q EMPLOYMENT FALLS 14,000, FIRST DECLINE SINCE 2016

9.36am GMT

Britain's jobless rate remains at a 42-year low of just 4.3%.

Unemployment fell by 59,000 between July and September to 1.42 million, the Office for National Statistics says. That's 182,000 less than a year earlier.

9.33am GMT

Breaking! Britain's wages squeeze continued to bite in the last quarter, according to the latest Labour Market report just released.

Basic pay rose by just 2.2% per year in July-September, meaning that wages continued to lag inflation.

9.29am GMT

Britain has rediscovered its taste for Angel Delight!

Sales of the retro desert are up 30%, in a boost for Premier Foods.

9.07am GMT

Overnight, Japan has posted its seventh consecutive quarter of growth, the longest run in over a decade.

Another three months of nominal GDP growth in Japan, now up year-on-year for 18 successive quarters. But Abenomics doesn't work! pic.twitter.com/KURes58B5p

8.43am GMT

This chart, from manufacturing group EEF, shows how UK wages have fallen below inflation (the dotted line) this year:

Despite the sustained fall in the unemployment rate, wage squeeze is set to continue #ukeconomy #ukmfg https://t.co/guUjyCFSqS pic.twitter.com/3Sv2D0cKvA

8.35am GMT

Today's jobs report will paint a picture of an economy suffering from subdued wage growth, but enjoying record low unemployment.

Lukman Otunuga, research analyst at FXTM, says the pound could suffer if the wage figures are particularly bad.

Although Britain's unemployment rate is at a 42-year low, the buzzkill remains, that little sign of rising pay growth continues to weigh heavily on sentiment. If average earnings struggle to pick up, consumers are likely to continue feeling the squeeze, especially when considering how inflation remains at a five-and-a-half year high, at 3%.

8.00am GMT

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

Britain's real wage squeeze is set to deepen today, when we get new data showing how the UK labour market is performing.

With the Bank of England's Regional Agents' survey indicating pay settlements could pick up next year to 2.5-3.5% next year, it could well be some way into 2018 before there is sufficient evidence from the labour market reports that pay growth is making a meaningful advance.

With unemployment at 42 year lows of 4.3%, it surely can only be a matter of time before wage pressure starts to manifest itself further.....

We've already started to see increasing evidence that wages at the lower end of the income scale are rising at rates faster than inflation as the effects of increases in the minimum and living wage help pull up wages at the bottom of the pay scales.

Softer open in prospect for European indices after losses on Wall Street and steep sell off across Asian Pacific markets. #Crudeoil continues to slide. #FTSE called 20 lower

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