Article 2SXA3 US Federal Reserve raises interest rates and says recovery is on track - as it happened

US Federal Reserve raises interest rates and says recovery is on track - as it happened

by
Graeme Wearden (now) and Nick Fletcher
from Economics | The Guardian on (#2SXA3)

America's central bank has taken another step towards normalising monetary policy, by increasing interest rates to a 1% to 1.25% range

9.23pm BST

That's all for today. Here's a quick round-up.

The US Federal Reserve has pressed on with the normalisation of interest rate policy, by hiking borrowing costs for the second time this year. The Fed funds rate is now 1% to 1.25%.

The Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further.

"The Fed made little changes in the language or projections for further interest rate hikes.

They acknowledged that inflation was running below target, but also that job gains have been solid. We expect another rate hike and some balance sheet normalisation before the end of the year."

Now hawkish #Fed gave more info than expected on balance sheet tapering and the market gave the data dump a free pass.

9.08pm BST

DING DING goes the closing bell on Wall Street.

And the Dow Jones industrial average has finished at a record high, up around 0.2%

8.55pm BST

Capital Economists have provided a brisk summary of the Fed's decisions today:

As widely expected, the Fed raise its policy rate target by an additional 25bp today, to between 1.00% and 1.25% and, despite the recent weakness of core inflation, Fed officials still expect to raise that rate once more in the second half of this year.

The Fed also laid out plans for shrinking its balance sheet, with the initial run-off even smaller than we had previously expected, although it offered no specifics on the timing of when that normalisation would begin other than "this year".

8.44pm BST

Wall Street isn't too happy with Janet Yellen's comments.

The Nasdaq index has dropped by 1% after the Fed chair downplayed recent weak inflation data and signalled that US interest rates will continue to rise over the next couple of years.

8.36pm BST

Finally, Yellen gets a question about apprenticeships, and Donald Trump's new push to get more Americans to develop their work skills on the job (a specialist subject for the President, of course).

Yellen agrees that it's an important area.

Really interesting from Yellen on labor markets: large employers are upgrading employee skills bc of low labor availability, small can't.

Yellen on apprenticeships: labor market is tight, larger firms spending more on training... and this is an "important area."

8.29pm BST

Q: Now you are getting ready to reduce your balance sheet, what have you learned about QE and whether it works?

Great question, says Yellen, who explains how staff at the Fed, and outside, have done a great deal of work evaluating QE.

I think we have learned that it works, it's a valuable part of the toolkit.

8.19pm BST

Q: The president has credited you with being a 'low interest rate' person. Do you agree?

Yellen says she 'strongly supported' the Fed's policy of keeping interest rates at record lows after the financial crisis -- so i guess she's accepting the accolade, despite having just raised rates!

8.11pm BST

Q: What do you say to the group of economists who are calling for the Fed's inflation target to be raised?

[This group, which includes Nobel laureate Joe Stiglitz, warned that the Fed could trigger a recession if it kept raising rates]

Yellen: Reconsideration of 2% infl target is "one of the most impt questions facing monetary policy around the world"

Yellen on raising the inflation target: Fed will reconsider at some future time, want to take in wide range of views and research.

8.07pm BST

Fidelity's chief economist, Anna Stupnytska, is surprised that Yellen is sounding more cautious - especially about inflation and wage growth.

#Fed completely ignoring low #inflation and wage growth. Hawkish. Quite incredible! #Yellen #USD

8.01pm BST

Back to inflation...

Q: Is it possible that globalisation, and falling central bank credibility, mean we've entered an era of low inflation where it will be very hard to get wages and prices rising again?

7.59pm BST

7.57pm BST

Yellen says she's not seen much evidence that Donald Trump's proposed tax and spending plans have changed consumer or business spending.

7.56pm BST

Q: Is the Fed worried about the recent run of weak inflation futures?

Yellen doesn't sound too worried, saying that inflation can be "noisy" and affected by idiosyncratic factors.

7.54pm BST

Onto questions, and the press pack quickly home in on Yellen's future.

Q: Have you spoken to the president about the possibility of serving a second term, and would you be interested?

Yellen says she is fully committed to serving her full first term, but she's not had any discussions with president Trump about a second term.

7.45pm BST

Yellen is now outlining the Fed's plan to start reducing its balance sheet later this year [details here].

She confirms that the Fed will take a cautious approach, initially with a $6bn monthly cap on sales of Treasury bonds and $4bn on mortgage-backed securities.

7.41pm BST

Janet Yellen also acknowledges the shooting in Virginia earlier today, where several people including Steve Scalise, Republican House majority whip, were shot.

Our thoughts are with those who were injured this morning, the Fed chair says.

Fed Chair Yellen: "Our thoughts are with those who were injured this morning"

Live: https://t.co/WsY9lk7UDP pic.twitter.com/hEBVjoAJ9h

7.39pm BST

Fed chair Janet Yellen explains that today's interest hike reflects the "progress" in the economy, which appears to have "rebounded" after slowing in the first three months of 2017.

A pick-up in global growth is helping US exports, she says.

7.34pm BST

Over in Washington, Federal Reserve chair Janet Yellen is holding a press conference to discuss today's decisions.

You can watch it live here.

7.26pm BST

The most important news tonight is the new guidelines on Fed balance sheet reduction.

So says Tom Stevenson, investment director for personal investing at Fidelity International.

There was never much doubt that the Federal Reserve would raise interest rates by a further 0.25% at today's meeting to between 1% and 1.25%. ...

More important was what the US central had to say about its plans to rein in its bloated balance sheet, which has ballooned to $4.5trn since the financial crisis as the Fed has bought government and mortgage-backed bonds to underpin the American economy. The Fed said today that it would decrease reinvestment of maturing bonds at a steadily increasing rate until after a year it is holding back $30bn a month on Government bonds and $20bn on mortgage backed securities.

7.23pm BST

The Fed has taken another step towards "normalisation", says Nancy Curtin, chief investment officer at Close Brothers Asset Management commented.

"Recent economic indicators have not been weak enough to prevent Yellen pulling the lever on the third rate hike in seven months.

Yes, inflation remains elusive, and wage growth relatively weak, but the data does not suggest growth has slowed enough to suggest a change in tack.

7.22pm BST

Today's interest rate hike shows that the Federal Reserve is confident that the US economy is recovering, says Kully Samra, UK Managing Director at Charles Schwab.

Samra adds:

Despite recent underwhelming jobs numbers, the underlying US economic data remains robust enough to warrant tightening.

While the economy is bouncing back from a weak first quarter, earnings have been strong and even in the wake of continued political uncertainty, corporate confidence remains secure. The market has demonstrated that it is comfortable with gradual rate hikes and will be reassured that the Fed has today committed to its promises. We expect at least one more rate hike this year but incoming data will influence future decisions."

7.20pm BST

We have some unexpected news - the Fed has outlined how it expects to start reducing its huge balance sheet.

Reuters has a great explanation:

The Fed gave a clear outline on its plan to reduce its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities, most of which were purchased in the wake of the 2007-2009 financial crisis and recession.

"The committee currently expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated," the Fed said in its statement.

7.16pm BST

The Federal Reserve has updated its dot plot, which shows where each policymaker thinks interest rates will be over the next few years.

It shows that 4 policymakers expect rates will remain on hold for the rest of 2017.

Dot Plot Changes June vs March: pic.twitter.com/vYBiFDIKWi

7.13pm BST

The US dollar has fallen by 0.4% against a basket of currencies as Wall Street digests today's announcement.

So far muted dollar reaction https://t.co/kKj3XUxOCm pic.twitter.com/nEFsdmQ6cb

7.08pm BST

In its prepared statement, the Federal Reserve says that America's labour market has "continued to strengthen" since its last meeting.

Economic activity has been "rising moderately" so far this year, the Fed says:

Job gains have moderated but have been solid, on average, since the beginning of the year, and the unemployment rate has declined. Household spending has picked up in recent months, and business fixed investment has continued to expand.

Inflation on a 12-month basis is expected to remain somewhat below 2% in the near term but to stabilise around the committee's 2% objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

#Fed hikes rates 25bps as expected to 1.25%, Maintains forecast for 1 more hike in 2017. Here is the statement. https://t.co/KpIkgmztAl pic.twitter.com/ARMHWrfrG2

7.02pm BST

Breaking: The Federal Reserve has voted to raise American interest rates today, to a range of 1% to 1.25%.

That's a quarter-point move, and exactly what Wall Street expected ...

6.42pm BST

Just over 15 minutes to go, until the Federal Reserve either delivers the interest rate hike that the markets expect, or shocks us by leaving borrowing costs on hold ...

US rate decision due at 7pm UK time. Markets pricing in a 95% chance the Fed will raise rates for the second time this year.

5.38pm BST

Earlier, on the BBC's Today programme, the consensus seemed to be the US Federal Reserve would be raising rates. George Magnus, economist and senior advisor at UBS said:

I think they [the Fed] really want to do this [rate rise] and I think they want to do it because they are trying to normalise the situation. They're quite worried about sub prime - in other words less than good quality automobile loans and commercial real estate. So they have other concerns in addition to the economy. After today, though, things might change, because if inflation doesn't pick up in the United States later this year then the expectations that the Federal Reserve will keep going will be revised.

The US economy is fundamentally a 2% growth economy. All the soft data, the surveys have been great but if you look at the hard data it doesn't look as great, it doesn't look terrible either. The US recovery is continuing, it's not as strong as the markets might suggest ... I also agree that the Fed will hike rates today. As long as the markets are aligned as they are with yields pretty low, the dollar fairly weak but equity markets soaring, it gives the Fed room to hike. Of course they'd like to not just normalise rates but start shrinking their balance sheet but there's a deadline for that which is when Janet Yellen's term ends next year.

5.28pm BST

A slump in the oil price after disappointing US weekly inventory figures has seen some of the shine come off stock markets. The FTSE 100 has also been hit by a rise in sterling, which is bad news for the overseas earners which dominate the UK's leading index. On top of that, commodity companies fell back despite some reasonable industrial production figures from China. There was also some caution among investors ahead of the US Federal Reserve meeting, which is widely expected to raise interest rates later. The final scores in Europe showed:

4.59pm BST

Six months of #OPEC and Russian output cuts, and WTI is now under $45 a barrel. This isn't going as Riyadh and Moscow had it planned. #OOTT pic.twitter.com/W3EUZ28EDp

4.18pm BST

On oil, Chris Beauchamp, chief market analyst at IG, said:

Oil prices are in freefall again, thanks to a second consecutive failure of forecasters on the oil inventories front. Stockpiles dropped by much less than forecast, although at least they got the direction right this week, after last week's shock rise in inventories. What is particularly noticeable is that oil production continues to rise, even as prices fall. It looks like everyone is keen to get as much sold before another rout in prices. WTI now trades at its lowest level in six weeks, with little sign of a turnaround in place.

3.52pm BST

Seems there's only one thing that matters in the oil market these days #oott pic.twitter.com/2CFx2TUG1X

Both Brent crude and West Texas Intermediate are now down more than 2%.

3.42pm BST

The weekly US oil figures have shown a smaller than forecast fall in crude stocks.

The Energy Information Admistration said crude stocks fell by 1.66m barrels last week to 511.55m, lower than the 2.7m drop expected by the market and indicating weaker than expected demand. Gasoline stocks rose by 2.1m barrels compared to forecasts of a 0.5m decline.

3.20pm BST

Back with the dollar, and it has fallen to its lowest level against the euro since the start of November. The single currency currently sits at $1.1286, up 0.64%, after reaching $1.1295.

Bloomberg Dollar Index in free fall following weak US econ numbers. Drops to the lowest level since Oct2016 on lower rate hike expectations. pic.twitter.com/YYLH7YOM6C

2.42pm BST

With the uncertainty over the Federal Reserve's view on further interest rate rises in the wake of the day's weak data, Wall Street has made a mixed start.

The Dow Jones Industrial Average hit a new peak of 21,354 initially, before falling back to 21,334, a gain of around 6 points. The S&P 500 edged up 0.12% at the open, while the Nasdaq Composite was unchanged.

2.36pm BST

Jasper Lawler, senior market analyst at London Capital Group, also believes the weak US data casts doubts on further Federal Reserve rate hikes after today:

A double dose of soft economic data sent the US dollar plunging and gold rallying before the Federal Reserve rate decision. Slowing inflation and flat retail sales add to the growing sense that today's meeting could see the last US rate rise this year.

We would be in a state of shock if the Federal Reserve didn't lift interest rates at its meeting later today.... Movement in the dollar will depend on what kind of signal policymakers give about the next hike, possibly in September. The US economy has not been firing on all cylinders but the Fed risks losing credibility if it backed off from a rate hike when it's been so heavily intonated. A 'dovish hike' seems most appropriate, which may not be enough to generate enthusiasm for the dollar.

2.17pm BST

With the expectations for further US rate rises after today dimming, the dollar is continuing to weaken.

This is to the benefit of the pound, which has climbed above $1.28 for the first time since the UK election. It was a brief moment, but sterling is still up 0.36% at $1.2795.

2.11pm BST

The weaker than expected US inflation and retail sales figures could mean the Federal Reserve being more cautious about further interest rate rises this year, says James Knightley of ING Bank:

This [data] creates more of a headache for the Federal Reserve in how it communicates its hiking strategy. They keep talking about slower growth and weaker inflation being transitory (the word was used on nine separate occasions in the minutes to the May FOMC meeting), but the longer we go without seeing growth and inflationary pressures is resulting in the markets becoming less convinced about higher interest rates.

With little sign of tax reform and fiscal stimulus coming the Fed will likely sound more cautious on the prospect of an additional hike later this year even though their forecasts will almost certainly include it when released later on today.

1.57pm BST

The dollar has just hit a one week-low against a basket of currencies, as the markets give their verdict to that double-dose of US data.

Jamie McGeever of Reuters says today's inflation figures were much weaker than expected:

US core CPI falls to 1.7% in May, the lowest in 2 years and below every one of 48 economists' forecasts in a Reuters poll.

Market odds on a Fed rate hike in September following that CPI release are below 20% for the first time since the eve of the U.S. election

#USD selling off as soft #CPI inflation and poor #retailsales spark spec #Fed could pause or deliver a dovish hike today. #FOMC #forex pic.twitter.com/zNq3dALTX8

Between CPI & Retail Sales, and the FOMC meeting, today could be a rough day for the US Dollar $DXY https://t.co/wZMhyCKdCW

1.44pm BST

Another newsflash! US retail sales have suffered their biggest decline in 16 months.

Retail sales declined by 0.3% in May, new figures from the Commerce Department show. That's the biggest drop since January 2016, and dashes expectations of a 0.1% rise.

Dollar drops after CPI and retail sales miss ahead of Fed decision https://t.co/qVADYLT5r8 pic.twitter.com/UfV0dFC2qp

1.38pm BST

Newsflash: America's inflation rate has fallen!, surprising the markets and sending the dollar sliding.

Consumer prices across the US dropped by 0.1% during May, having risen by 0.2% in April.

US 'Consumer Pice Index' falls short of expectations in May; core rate also soft . . . #USD #CPI #FED pic.twitter.com/8irQ5fnPpX

Dollar sinks after US CPI miss pic.twitter.com/alJZ2vvjvr

1.17pm BST

Our economics editor, Larry Elliott, says Britain's wage squeeze since the financial crisis struck is "staggeringly" bad.

He writes:

Cast your mind back to March 2008. The financial markets have been in turmoil since the previous summer and in the previous month the Labour government has been forced to nationalise the troubled bank Northern Rock. Few realised it at the time but the economy had peaked. A deep and brutal recession was about to begin. In that month, the average basic weekly wage, excluding bonuses, was 473.

The recession officially came to an end by late 2009 and after a couple of years of weak and patchy growth, the worst seemed to be over. Activity picked up, unemployment started to come down. Yet more than nine years after the slump of 2008 began, wages - the yardstick by which most people judge whether the economy is doing well or not - have not recovered. In fact, according to the Office for National Statistics, they have gone backwards. The average basic weekly wage, adjusted for movements in prices, now stands at 458.

Related: UK pay squeeze breaks all sorts of records for all the wrong reasons | Larry Elliott

12.12pm BST

Over in Europe and eurozone industrial production rose by 0.5% month on month in April, with March's figure revised up from a 0.1% fall to a 0.2% increase. Edoardo Campanella, economist at UniCredit Research, said:

The eurozone enters the second quarter on a good footing. Industrial production accelerated in April, expanding by 0.5% month on month from 0.2% in the previous month. The industrial production increase was broad-based across its main components (with durable capital goods being the only exception), but not across the largest economies. Germany led the way, while France and Italy recorded slight declines. However, part of the weakness is due to some technical factors related to both the Easter break and a bridge-day effect in Italy that weighed on the number of working days and, thus, on factory activity. This might explain why today's figure, albeit good, seems disappointing when compared to the exceptionally strong manufacturing PMI reading that in April hit a six-year high.

Since the most recent surveys continue to point to a rather solid growth in manufacturing activity in the eurozone, it is fair to expect that May's hard data from the industrial sector will finally reflect this acceleration in output activity.

Growth in production of goods dropped in April though and capital goods production even declined. While the monthly data for production is volatile, this does show that industry continues to struggle on its way up.

The outlook for industry does remain bright though as businesses have been indicating that backlogs of work are increasing as new orders are coming in at a faster pace. This will likely translate into accelerating growth over the course of Q2. Still, while backlogs of work have been increasing, this does not mean that Eurozone industry is overheating. Capacity utilisation has been improving over 2016 and is getting closer to peaks seen in previous expansions, but businesses are also still indicating that a lack of demand is limiting production far more than a lack of labour, funding or equipment.

12.02pm BST

Here are the Liberal Democrats on the fall in real wages. The party's leader Tim Farron joined the calls for an end to the freeze on public sector pay rises:

For a government that used to bang on about the Just About Managing, they are doing diddly squat to help them. This represents the biggest fall in real wages since August 2014.

Staff are working more hours, for less pay and with higher levels of stress. More people are living pay cheque to pay cheque and having to struggle at the end of every month to get by.

11.56am BST

If you're just tuning in, here's our news story on today's unemployment report:

Related: Pay squeeze intensifies as wage growth falls further behind inflation

11.56am BST

The pound has now dropped into the red, as the City shows its disappointment with Britain's poor wage growth.

Sterling is now down 0.2% today at $1.2725.

11.31am BST

The wage squeeze is a "headache" for Britain's government (on top of everything else) says the Joseph Rowntree Foundation.

Helen Barnard, JRF's head of analysis, says the labour market has now reached a tipping point which can't simply be ignored by Westminster.

"It's encouraging to see that employment levels continue to rise and unemployment has fallen again. But the troubling news for the government is the continued squeeze on wages for those are in work. This is the first time that there has been a year-on-year decrease in real total pay since 2014.

"We have reached a tipping point where rising costs are outstripping earnings, leaving millions of just managing families in a precarious position. The election campaign paid precious little attention to the squeezed living standards of low income households and their prospects of finding secure, well-paid work.

11.30am BST

UNISON, the union, says today's report shows how much stress the public sector is facing, as it also calls for the 1% pay cap to be ditched.

General secretary Dave Prentis warns:

"Demand for public services continues to rise, but these figures confirm that the workforce is still being cut.

"Services are being starved of funds and staff shortages mean nurses, paramedics, teaching assistants and council employees are having to work even harder, but for less money.

11.06am BST

The governent's Secretary of State for Work & Pensions, David Gauke, is encouraged that employment remains at record levels.

He says:

"This government wants to give everyone the opportunity to succeed, regardless of where they live or their background.

"This is yet another strong set of record-breaking figures with employment up and unemployment down, fuelled by full-time opportunities.

"We welcome the overall increase in employment, but are deeply concerned that millions remain in low paid, insecure work.

"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.

10.54am BST

John Hawksworth, chief economist at PwC, suggests the government may have to bow to pressure and end its 1% cap on public sector pay rises, as the TUC and others demand.

With inflation likely to be heading above 3% later this year, the squeeze on real pay growth is now getting serious and is likely to dampen real consumer spending growth for some time to come. The cost of Brexit to people's living standards due to the fall in the pound is becoming ever more apparent.

"The squeeze is even more severe in the public sector, where pay is only rising at around 1%. The sustainability of this pay policy for nurses, doctors, teachers and other key public service workers will come increasingly into doubt as inflation rises to 3% and above later this year."

10.39am BST

The rise of Britain's 'Gig economy', with its low-paid, precarious jobs, is surely a factor behind the weak wage growth.

Dr John Philpott, director of The Jobs Economist, says it is "remarkable" that pay is so weak when the employment rate is at a record high of nearly 75%.

Hard times and near full employment make strange bedfellows, highlighting the extent to which a de-regulated labour market with an abundance of workers available to fill low wage vacancies has altered the UK jobs landscape.'

10.31am BST

The Resolution Foundation have crunched today's figures, to show how Britain's workers' pay is still below its levels before the financial crisis (once you adjust for inflation).

Pay squeeze deepens sharply in today's labour market stats: annual real pay growth was -0.6% in the three months to Apr-17 pic.twitter.com/lJqnunNoOv

Return of pay squeeze leaves avg weekly earnings 16 below peak. Restoration of peak likely to be delayed well into next decade pic.twitter.com/UB3SQYIaZZ

Jobs growth stays strong - employment rate remained at record high of 74.8% in the three months to April pic.twitter.com/p7vjRmOkRp

Encouraging employment re-balancing in much of the country, but the employment rate is low & falling in NI, London and E Mids pic.twitter.com/uIgUEhWmM6

10.22am BST

Ben Brettell, senior economist at Hargreaves Lansdown, also fears that the pay squeeze will hurt growth:

The UK economy faces a dangerous cocktail of political uncertainty, slowing growth and shrinking real wages. First-quarter GDP figures were disappoining, while a recent report from VISA confirmed consumers are under pressure, with spending falling 0.8% year-on-year in May.

Households are being squeezed from both directions, with inflation rising faster than expected and wages rising more slowly. This doesn't bode well for economic growth - the UK economy is heavily reliant on the consumer and falling real incomes will eventually translate into lower retail sales.

10.21am BST

The pay squeeze puts more pressure on the Bank of England to consider raising interest rates to curb inflation, argues Neil Wilson of ETX Capital (whose hopes of stronger wage growth have been firmly dashed).

He writes:

Wages are climbing at a rate of just 2.1%, or just 1.7% when you excluded bonuses. This run rate is just not enough to sustain consumer spending where it has been of late when inflation is accelerating. Average earnings in real terms slumped by 0.6%, or 0.4% including bonuses. This will have a material effect on GDP growth in the second quarter.

The pay-inflation gap is widening despite record low unemployment, which is also a sign of structural problems for the UK economy. Total pay growth was running above 3% in the first half of 2015, when inflation was anchored at around zero. That sweet spot is well and truly over.

10.14am BST

Real pay is falling across the economy, points out Professor Geraint Johnes, Director of Research at the Work Foundation:

On the three month average measure, pay settlements fell from 2.3% in March to 2.1% in April [that's including bonuses].

The fall in the single month measure is more dramatic - from 2.4% to 1.2% - though it should be noted that this measure is generally held to be less reliable.

10.04am BST

Maike Currie, investment director for personal investing at Fidelity International, has a few theories for why real wages are shrinking again.

One could be 'slack in the labour market' - which is economist speak for the fact that the jobs market isn't working as well as it could.

This is usually down to underemployment: people working part-time who want a full-time job or hidden unemployment: people who are not actively looking for work but who would rejoin the workforce if the jobs market were stronger.

9.59am BST

The TUC, which represents Britain's workers, is calling on the government to act now and end its curbs on public sector pay.

"Real wages have fallen for the second month in a row. Unless the government gets its act together, we'll soon be in the middle of another cost of living crisis.

"Ministers must focus on delivering better-paid jobs across the UK. And it's time to bin the artificial pay restrictions on nurses, midwives and other public sector workers.

9.56am BST

The fall in UK real wages is likely to hurt economic growth, warns Naeem Aslam of Think Markets.

It is the UK consumers who have been pulling the UK economy and if we see them slowing down, it surely means that economy cannot do well

Brexit is certainly on the centre stage when it comes to this and I personally believe that investors are feeling the impact of this.

9.53am BST

Dutch bank ING is alarmed by the slowdown in UK pay growth, at a time when Britain's political future is so unclear.

#UK employment: Key story is 1.7% wage growth now considerably below 2.9% inflation. Political uncertainty not good for labour market $GBP

Wage growth in the UK slowing to 1.7%, lagging further behind inflation. Effectively, this is squeezing U.K. households

Joint highest employment rate since records began in 1971, joint lowest unemployment rate since 1975. But... terrible wage growth figures.

And again with the correct chart labels. Nominal pay slowdown by sector since December. pic.twitter.com/TWNxEyYT9q

Missing: the UK Philips Curve. If seen, please contact the Bank of England.

9.49am BST

Today's report also shows that British workers are suffering the worst wage squeeze in two and a half years.

The ONS says:

Between February to April 2016 and February to April 2017 in real terms (that is, adjusted for consumer price inflation) total pay for employees in Great Britain fell by 0.4%, the lowest growth rate since July to September 2014.

9.42am BST

If you include bonuses, average pay grew by 2.1%. That's better than the 1.7% rise in regular pay, but still not enough to keep up with inflation.

The Office for National Statistics says:

Latest estimates show that average weekly earnings for employees in Great Britain in real terms (that is, adjusted for price inflation) fell by 0.4% including bonuses, and fell by 0.6% excluding bonuses, compared with a year earlier.

9.34am BST

Breaking! Basic pay in the UK economy grew by a meagre 1.7% year-on-year in the three months to April.

That's much worse than expected, and also the lowest rise in regular pay since February 2016.

9.27am BST

The pound is dipping back as City traders brace for the jobs report...

Stand by your desks! UK wages and unemployment data is due soon #GBP #GDP

9.12am BST

The pound should strengthen if today's wage figures are less grim than feared.

Neil Wilson of ETX Capital says:

Unemployment is likely to be decent so the focus is on earnings. Stronger-than-expected wage growth could help support sterling a touch as it will help offset concerns that falling real wages is destroying consumer spending.

Yesterday's inflation beat at 2.9% highlights the problems facing the economy so a sign that earnings are at least trying to keep pace will be welcome and allay concerns that consumers stop spending.

9.01am BST

You can get up to speed on the state of Britain's labour market with these charts from economist Rupert Seggins:

(1/5)The big labour market news was yesterday's inflation rise. Consensus is sub-inflation 2%y/y regular pay growth. New @ONS figs at 9:30 pic.twitter.com/dKiNjw60yX

(2/5) The bigger picture is that the past 10 years have been the worst for pay growth in 155 years. pic.twitter.com/YHBVGA1ayF

(3/5)Lots of attention on recent energy/food/sterling-fuelled inflation, but longer term, earnings and productivity are pretty tied together pic.twitter.com/H0NMDAxhMK

(4/5)The good news is that the UK employment juggernaut continues to rumble on. Consensus is for a 125k increase on the 3 months to January. pic.twitter.com/8eBaHpyp43

(5/5) Keep an eye on the claimant count rate. Consensus is for it to remain at 2.3%, but it has been rising of late. pic.twitter.com/QBqSeWpBPA

8.52am BST

The US dollar is under some pressure today ahead of the Federal Reserve decision, which is helping nudge the pound up.

With an interest rate hike today 'priced in', traders are focusing on the tone of the decision from the Federal Reserve's Open Market Committee.

The FOMC's response is likely to be a 'dovish hike' and that's priced in, to a large degree. Uncertain about how much slack there is in the economy or the labour market, FOCM members are inclined to want to 'normalise' rates while they have the chance, but they seem very pragmatic about the longer-term outlook.

So more likely to raise rates now, without overlay hawkish commentary, and then lay the groundwork for another hike in the autumn if markets don't take fright in the weeks ahead.

8.38am BST

In the City, the FTSE 250 index - which contains medium-sized UK-focused firms - has jumped by 0.5% in early trading.

Housebuilder Bellway is the biggest riser, up 3.6%, after reporting that customer demand for new homes is still strong.

8.15am BST

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8.13am BST

Sterling is rising in early trading, hitting its highest level since Britain's shock general election results landed.

The pound has gained a third of a cent to $1.278, as traders brace for this morning's UK jobs report.

Currency investors remained cautiously optimistic over a softer Brexit following last week's UK election outcome, resulting in a hung parliament.

Although the political uncertainty in the UK and pending Brexit negotiations are still in focus, much attention will be directed towards the UK jobs report this morning.

7.51am BST

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

Britain's cost of living squeeze will be dragged back into the spotlight today, when the latest employment data is released.

Unless last month's gains somehow turn out to be a total blip, it wouldn't be too surprising if the level of employment rises again by close to a triple-digit number of thousands in the three months to April.

The rotation of workers out of part-time roles into full-time employment is now an established theme and if we see this trend once more it would imply that slack is being partially eroded as a result of reduced 'underemployment'.

"We do expect her to try to be somewhat forceful in conveying...to market participants that their skepticism over hikes after the June meeting may not be warranted."

Tomorrow at 2:30 p.m. ET: Chair #Yellen hosts live #FOMC press conference: https://t.co/AknBNh2ef4 pic.twitter.com/mOjT9owfyr

Opening Call at @LCGTrading #FTSE -4 points at 7496#DAX +22 points at 12787#CAC +16 points at 5277#EuroStoxx +4 points at 3561

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