UK jobless rate hits 5.1%; reopening hopes lift leisure stocks, but tech slides – as it happened

Graeme Wearden

from Economics | The Guardian on 2021-02-23 18:02 (#5EHCQ)

Rolling coverage of the latest economic and financial news

5.56pm GMT

Time for a recap.

Unemployment in the UK has hit its highest level in almost five years, as the Covid-19 pandemic continues to hit the labour market.

The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved."

Tech shares pared their losses during Fed Chair Jerome Powell's comments to Congress. https://t.co/IBv253qWXn

5.38pm GMT

European stock markets had a mixed day, with small gains in London and Paris, but losses in Frankfurt and Milan.

Spain's IBEX was the outperformer, though, jumping by 1.7%. Real estate firms, consumer cyclicals and banks were the best performers -- all firms that would benefit from an easing of lockdown restrictions.

5.22pm GMT

Gordon Ramsay has suffered his own kitchen nightmare during the pandemic with his restaurant empire missing out on nearly 60m of trade.

The celebrity chef said that in December his 35 UK restaurants had 10m worth of reservations wiped out overnight" when coronavirus restrictions were reimposed.

5.21pm GMT

The reopening of the UK economy can't come soon enough for Frasers Group, the retailer controlled by Sports Direct founder, Mike Ashley.

Given the length of this current lockdown, potential systemic changes to consumer behaviour and the risk of further restrictions in future, we believe this non-cash impairment could be in excess of 100m."

5.05pm GMT

Here's Michael Hewson of CMC Markets on the stock market rally in companies who should benefit from Boris Johnson's reopening plan:

Premier Inn owner Whitbread is also well on the way to wiping out its pandemic losses, its shares back at their highest levels in almost 12 months, while pub chain JD Wetherspoon shares have also returned to levels last seen a year ago.

The prevailing optimism is also feeding into the likes of Cineworld, whose shares have risen to an 8-month high, along with Hollywood Bowl, whose shares hit an eleven month high earlier today.

4.56pm GMT

While growth stocks such as tech firms struggle, companies badly hurt by the pandemic such as airlines, hotel groups and property companies have had a good day.

Commercial property groups British Land (+5.4%) and Land Securities (+4.4%) are the top risers on the FTSE 100 index in London today.

The gradual easing of lockdown restrictions, assuming no reversal, will support the resumption of operations and a revival in earnings in numerous sectors, and principally in those that rely on the free movement of people, such as tourism, retail and leisure activities.

This will be reinforced by the roll-out of the vaccination program, which will boost consumer confidence and consumption in the sectors that have been most affected by lockdowns."

Every year we get some sort of market correction that throws everyone off balance. It certainly appears as if the market could be shifting in sentiment given the rise in bond yields and the sell-off we are seeing in tech focused names. Indeed, should this be a prolonged sell-off there will be some who will think that tech has had its day in the sun, at least for now.

The key for investors is to block out the noise and remember your reasons for investing, but it is still worth keeping an eye on should we see a more sustained rotation to the more value orientated section of the market. Investors should also be mindful of portfolio balance, and not having all their eggs in one particular style or size basket. Despite the volatility, tech remains an important part of a portfolio given the trends seen since the pandemic, but this should serve as a reminder of the importance of being diversified.

4.40pm GMT

The tech selloff is easing off, a little. Tesla is now only down 4% at $685, while the Nasdaq Composite is down 1.6% in edgy trading.

3.58pm GMT

The pound has risen to a fresh near-three-year high against the US dollar.

Sterling has hit $1.411 against the greenback for the first time since April 2018.

The recovery this year is going to be consumer driven, with pent up demand and increased aggregate savings being unleashed as people break free of their homes and enjoy the kinds of experiences that have been kept from them for so long.

3.44pm GMT

Federal Reserve chair Jerome Powell is testifying to the Senate Finance Committee now, and maintaining a dovish approach.

He explains that the most important thing for the economy now is the Covid-19 vaccination programme.

"We don't really see how a burst of fiscal support or spending that doesn't last for many years would actually change those inflation dynamics"-Fed Chair Jerome Powell on fiscal relief and the persistent low inflation environment

On inflation, Powell tells @SenShelby that spending in the second half of the year could pick up and put some upward pressure on inflation

But that pressure isn't likely to be large or sustained

Inflation dynamics "do change over time but they don't change on a dime."

3.11pm GMT

Just in: America's top central banker has warned that inflation and employment remain well below the Federal Reserve's goals.

In his prepared testimony to Congress, Fed chair Jerome Powell says it will probably take some time" to achieve substantial progress on bringing inflation to target and lowering unemployment.

Despite a sharp rise this year in bond yields that has accompanied heightened concern over inflation, Powell said price pressures remain mostly muted and the economic outlook is still highly uncertain."

The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved," the Fed chief said in prepared remarks for the Senate Finance Committee.

Following large declines in the spring, consumer prices partially rebounded over the rest of last year. However, for some of the sectors that have been most adversely affected by the pandemic, prices remain particularly soft," he said.

Overall, on a 12-month basis, inflation remains below our 2 percent longer-run objective."

BREAKING: Powell says inflation is still 'soft' and the Fed is committed to current policy stance https://t.co/pi4jU8IQ2h

Powell will also say: While we should not underestimate the challenges we currently face, developments point to an improved outlook for later this year. In particular, ongoing progress in vaccinations should help speed the return to normal activities." https://t.co/pi4jU8IQ2h

3.02pm GMT

Here's Fawad Razaqzada, analyst at Think Markets, on today's moves:

It is rare to see the markets providing so many mixed signals. Technology names have been hammered, as too have cryptos with Bitcoin falling more than 10% and below the key $50K level. Yet, it is not entirely risk off, with some European indices being sharply in the black, while others are lower. Commodities that are sensitive to the economy, which have been outperforming, were also lower at the time of writing. So, what the hell is going on?

3.01pm GMT

Tesla (-9%) isn't the only major tech stock struggling today.

Apple is down 3.5%, Amazon has lost 2.2%, Alphabet (Google) has fallen by 2.3% and Microsoft has lost 1.7% in early trading.

BREAKING:

*NASDAQ COMPOSITE INDEX HITS LOWEST LEVEL SINCE JAN. 29; LAST DOWN 3.4%$QQQ pic.twitter.com/iVtyVcsU2R

2.55pm GMT

The Nasdaq 100 has erased 2021 gains pic.twitter.com/haajKDiHEf

2.44pm GMT

Wall Street has opened in the red, with technology stocks falling sharply.

The Dow Jones industrial average has dropped by 126 points, or 0.4%, to 31,394 points. The wider S&P 500 index is down 1%.

U.S. markets open lower https://t.co/FYhywaZ3gw pic.twitter.com/jdwzaK3k1k

*TESLA FALLS 9.3% AT THE OPEN, ERASING ITS YEAR-TO-DATE GAINS$TSLA pic.twitter.com/10JjOLsH0A

Tesla ( $TSLA ) is now down 26% in the last month...

Is it time to buy the dip?

2.35pm GMT

Over in the US, house prices have jumped at the fastest rate in almost seven years.

Home prices nationally increased by 10.4% year-on-year in December, according to the S&P/Case-Shiller home price index.

Today's S&P Case Shiller Index showed that #home prices accelerated in December 2020, with a 10.4% YoY gain, as buyers felt the strong pull of record-low #mortgage rates and kept bidding on a dwindling supply of homes. @GeorgeRatiu pic.twitter.com/9M3f6b3qqE

Case-Shiller: National House Price Index increased 10.4% year-over-year in December https://t.co/qOPgSLU4Iw pic.twitter.com/ktWYsrESdD

2.10pm GMT

Worryingly, job losses across the UK's wholesale and retail sectors have hit a record.

The CBI's latest distributive trades' survey, released this morning, shows that retail sales kept falling in the year to February. With internet sales growing at record pace, retail groups kept laying off staff.

CBI DTS February - Retail sales fell in the year to February, at a slower pace than the previous month #dts pic.twitter.com/GCNCGVafZp

Internet sales grew at an historic pace (question first asked in Aug 2009), with the pace of growth expected to be broadly similar next month #DTS pic.twitter.com/xWBluKQzdF

Employment for the wider distributive sector fell at the fastest pace in DTS history (starting in August 1983), though broadly comparable with pace seen at the depths of the global financial crisis. #DTS pic.twitter.com/Bz8WsxkCZG

1.57pm GMT

The oil price has hit a new 13-month high today, lifted by the prospect of lockdown measures easing.

Brent crude traded as high as $66.79 per barrel, its highest since early January 2020, before dipping back.

1.28pm GMT

Bill Gates also struck a cautious note on bitcoin, telling Bloomberg TV yesterday that he's not bullish about the cryptocurrency.

Gates warned against retail investors being swept up in speculative manias" - especially if they aren't as rich as Elon Musk - and also cited its hefty energy demands, and the way it allows anonymous transactions.

Bill Gates is not bullish on Bitcoin.

"If you have less money than Elon, you should probably watch out," he tells @emilychangtv https://t.co/onvymqYDD3 pic.twitter.com/tZoKFmr2he

1.01pm GMT

Elon Musk, the maverick boss of Tesla, is no longer the world's richest person after shares in the electric car company dropped 8.6% on Monday, wiping $15.2bn (10.8bn) off his fortune.

Musk, who last month leapfrogged Amazon founder Jeff Bezos to take the title of the world's wealthiest person, dropped back into second place with a $183bn estimated fortune behind Bezos' $186.3bn.

1.01pm GMT

The technology selloff is gathering pace, with the Nasdaq index on track to fall 1% when trading begins.

In London, shares in Scottish Management Investment Trust are now down 10%, while its fund manager, Edinburgh's Baillie Gifford, have dropped 11%.

12.19pm GMT

Bitcoin was ripe' for a technical pullback after its parabolic surge, argues Neil Wilson of Markets.com.

And this week's selloff shows the perils of Tesla's crypto investment, he explains:

When companies tie themselves to any one horse it presents risks, even if it's the most-fancied filly at the post. Thoroughbreds are temperamental creatures and liable to break down when being ridden too hard. So, when Tesla tied its fortunes to Bitcoin with a $1.5bn investment, it was reasonable to expect there could be problems ahead. Yesterday, for various reasons Bitcoin crashed from an all-time high in a brutally swift drop that took prices from near to $58,000 to $47,400.

At one point, prices plunged $5,000 in 10 minutes before paring losses and attempting a recovery, which stalled at $55k before turning lower to trade under $49,000 this morning.

Tesla shares set to skid into the red for the year https://t.co/Jc3bBsyDOO pic.twitter.com/ujRP0nTqbc

12.07pm GMT

Cryptocurrency bitcoin is tumbling today, falling sharply back from its record highs.

It's currently trading around $46,500 - down over 15% today, and 20% off Sunday night's peak of $58,445, following losses on Monday.

Not so hunky dory in crypto-land. Bitcoin approaching $43,756 support. Below which we are looking at a potential wider retracement towards $35-40k. pic.twitter.com/mSE9tRrko1

I don't think that bitcoin ... is widely used as a transaction mechanism.

To the extent it is used I fear it's often for illicit finance. It's an extremely inefficient way of conducting transactions, and the amount of energy that's consumed in processing those transactions is staggering."

That said, BTC & ETH do seem high lol

11.46am GMT

Today's jobs report presents a mixed, and somewhat confusing picture, explains our economics editor Larry Elliott:

On one reading of the latest unemployment figures, the UK labour market is in pretty good shape. The number of people being added to payrolls is going up and so is the number of job vacancies. Annual earnings growth is up sharply to 4.7%.

An alternative reading is that the jobless total is going up along with the redundancy rate, while the number of people employed is going down.

11.38am GMT

Back on the jobless figures... and Cathal Kennedy, European economist at RBC Capital Markets, warns that today's data doesn't show the extend of unemployment in the UK:

The unemployment rate itself is likely already higher than the 5.1% estimated. The MPC [Bank of England Monetary Policy Committee] has identified two issues in that regard.

The first is that its thought that the number of foreign-born residents in the UK has fallen which means that the LFS is likely overstating the total number of employees in the economy.

11.33am GMT

Here's that eurozone inflation report:

Euro area annual #inflation up to 0.9% in January https://t.co/9AJHINEk5A pic.twitter.com/qxLzCOWh7n

10.59am GMT

Over in the eurozone, inflation has picked up - highlighting the squeeze on living costs as energy prices rise and economies reopen.

Annual inflation across the euro area was 0.9% in January 2021, up from -0.3% in December, according to eurostat.

Despite ongoing restrictions in the eurozone placing limits on consumer demand, inflation jumped by 1.2 percentage points between December and January to stand at 0.9%. Higher energy prices and shipping costs drove up the price level in January.

As restrictions are eased heading into summer, we could see demand start to place further upwards pressure on inflation."

10.21am GMT

Despite the rally in holiday and hospitality companies, the wider FTSE 100 share index is down 30 points or 0.5% at 6577 points.

Tech companies are under pressures, with online grocer Ocado down 4.3%, internet security firm Avast dropping 4.4% and Scottish Management Investment Trust (which holds stakes in US tech giants) shedding 5%.

The Nasdaq fell nearly 2.5% as investors dumped names like Apple and Amazon amid growing concerns about rising inflation expectations, the direction of interest rates and how that would put tech stock valuations into question.

Treasury yields rise ahead of Fed Chair Powell's testimony on the economy https://t.co/rhTbNq4bEB

10.04am GMT

Boris Johnson's reopening roadmap has accelerated the recovery in travel and hospitality stocks, says Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown:

The palpable sigh of relief that there are dates to target for struggling pub and restaurant chains, has translated into a share price rally for the sectors.

Although international travel won't begin until at least 17th May, news that the government's global taskforce will reconvene in April to recommend how holidays can resume has been a boost for the industry which has been anxious for a sense of direction.

9.55am GMT

In the City, shares in holiday companies and hospitality firms are rallying, after the UK government outlined its four-stage plan to end the Covid-19 lockdown.

This demonstrates that subject to any further diversions from the current course the Government has set, the industry and investment interest around it is poised to perform well.

Staying on track with the plans in place now should ensure the industry strengthens and - vitally - evolves to meet the new needs of travellers in a post-lockdown environment."

9.25am GMT

City economists fear that the UK unemployment rate will continue to rise this year, especially if the furlough scheme isn't extended beyond the end of April (the current cutoff)

Thomas Pugh, UK economist at Capital Economics, predicts it could hit 6.5% by the end of 2021:

The rise in the unemployment rate in December is another step up on the climb towards the 6.5% peak we expect by the end of the year.

But if the government follows the roadmap that it laid out on Monday and eliminates most COVID-19 restrictions by June, then the jobless rate may be back at its pre-pandemic level of 4.0% in 2023.

The latest UK jobs data provides further evidence that the jobs market stabilised in the final weeks of 2020, following a turbulent autumn. Redundancies had spiked towards the end of the summer, no doubt as businesses began preparations for the removal of wage support, which was original due to be heavily reduced at the end of October. But the furlough scheme was subsequently fully extended, and this latest data shows that this helped the unemployment rate to settle slightly above 5% - around a percentage point above its pre-virus level.

We suspect we'll see a similar pattern when we get the data covering the first few months of 2021, and in fact the latest real-time payrolls data suggests employment actually notched marginally higher in January. While recent ONS survey data indicates over half of hospitality/consumer-services businesses have less than four months of cash reserves, so far this doesn't appear to be translating into job losses."

The extension of the UK furlough scheme added some stability to the jobs market at the end of 2020/start of 2021. But as wage support is tapered later this year, @SmithEconomics expects the unemployment rate to rise towards 6-6.5%https://t.co/HzWbIfQ1PF pic.twitter.com/tk3gyLfFyu

9.12am GMT

Gerwyn Davies, senior policy adviser at the CIPD [Chartered Institute of Personnel and Development] says today's unemployment report shows the government needs to extend the furlough scheme.

The job retention scheme is due to finish at the end of April. But, with some lockdown restrictions in place until June, further support will be needed.

These are very good figures for an economy passing through a fragile and uncertain period. It is encouraging that the number of people in work increased for the second consecutive month and that the number of job vacancies continues to tick up. What is more remarkable is that the relative improvement in the labour market is due to a rise in the number of full-time employees, which has risen to a record high.

However, the most worrying concern is that the economy continued to shed jobs at the turn of the year at a very high rate, even if there are tentative signs that redundancy activity has fallen from its peak. Another worrying feature of the latest figures is the deteriorating job prospects for older workers. This age group has not only suffered the largest quarterly rise in unemployment but were also the most likely age group to be made redundant.

Taken in the round, the latest jobs figures indicate that the labour market continues to withstand the pandemic headwinds better than anybody could have expected. However, it remains in a far from healthy state, which underlines further the need for the Chancellor to extend the furlough scheme into the summer."

9.08am GMT

The UK unemployment total rose to 1.744m people in October-December, up from 1.365m in January-March, just before the first lockdown.

Anneliese Dodds MP, Labour's Shadow Chancellor, fears that many more will lose their jobs this year:

These figures reveal the full scale of Rishi Sunak's jobs crisis. We're already in the worst economic crisis of any major economy, there are now 1.74 million people out of work, and forecasts suggest another million will lose their jobs in the coming months.

The Chancellor should learn from the mistakes he made last year, when his last-minute extension to the furlough scheme came too late to prevent record redundancies.

8.57am GMT

Minister for Employment Mims Davies MP says there are glimmers of hope' in today's unemployment figures:

Today's figures highlight the challenges people are still facing, but there are glimmers of hope with employment relatively stable, over 600,000 people moving onto payrolls* and hours worked up.

With the Prime Minister setting out the roadmap to cautiously ease lockdown and the vaccine rollout protecting millions of people, we're looking ahead to our recovery - our Plan for Jobs is creating new opportunities, boosting skills, and delivering a package of support for people of all ages, getting Brits back into work as we push to build back better."

8.37am GMT

Nearly half the payroll jobs lost in the pandemic have been in accommodation and food businesses, today's labour market report shows.

Retail also suffered large job losses, with the pandemic lockdowns forcing store closures.

Of the 726,000 decrease in payrolled employees since February 2020, 345,000 can be attributed to employees working in the accommodation and food services sector, 149,000 in the wholesale and retail sector, while only 2,000 can be attributed to employees working in the education sector.

8.30am GMT

Chancellor of the Exchequer, Rishi Sunak, says he will present the next stage of the government's Plan for Jobs' in next week's budget:

I know how incredibly tough the past year has been for everyone, and every job lost is a personal tragedy. That's why throughout the crisis, my focus has been on doing everything we can to protect jobs and livelihoods"

At the Budget next week I will set out the next stage of our Plan for Jobs, and the support we'll provide through the remainder of the pandemic and our recovery."

8.22am GMT

Average pay grew strongly at the end of last year, with basic pay (excluding bonuses) rising by 4.1% per year. Total pay jumped by 4.7%.

Normally that would be welcome news for workers -- but it's partly because poorly-paid staff are more likely to have lost their jobs during the pandemic. That compositional effect' pushes average pay up.

8.11am GMT

This chart shows how UK payrolls (a good measure of employment) tumbled last year, before rising slightly in December and January:

7.48am GMT

Jonathan Athow, the UK's deputy national statistician, says there are tentative" signs that the UK's labour market was stabilising at the end of last year, given the rise in company payrolls in the last two months:

Commenting on today's labour market data, Deputy National Statistician for Economic Statistics Jonathan Athow said: (1/3) pic.twitter.com/vK3SSf6UUY

Jonathan Athow added: (2/3) pic.twitter.com/AvdIsDrvGZ

Jonathan Athow continued: (3/3) pic.twitter.com/ZHqQDnJWXG

7.30am GMT

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Britain's unemployment rate has risen to its highest level since early 2016, as the Covid-19 pandemic continues to hit the labour market - particularly younger workers.

But, there are also signs that the jobs market is stabilising, with a small increase in the number of payrolled employees in December and January, and a pick-up in vacancies.

#Breaking The number of UK workers on payrolls increased by 83,000 last month but has fallen by 726,000 since February 2020 due to the impact of the pandemic, according to the Office for National Statistics (ONS) pic.twitter.com/QyEaVVZKMC

There were 28.3 million employees paid through payroll in January, up 83,000 on December.

However, this was still 726,000 fewer than in February 2020, before the pandemic started to affect the jobs market https://t.co/JnDniCrnUb pic.twitter.com/8UU8SQWB7D

New analysis by age band shows that the 18 to 24 years age group has seen the greatest decrease in payrolled employees since February 2020.

Our latest labour market statistics have been published for October to December 2020 https://t.co/1DgbObMBLB pic.twitter.com/VCjyNs4y06

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