Article 35C2Q UK wage squeeze continues, as jobless rate remains at 42-year low – as it happened

UK wage squeeze continues, as jobless rate remains at 42-year low – as it happened

by
Graeme Wearden
from on (#35C2Q)

All the day's economic and financial news, including the latest UK labour force statistics

2.00pm BST

And finally.... here's our economics editor Larry Elliott on today's labour market report:

Firstly, it is clear that the economy is great at creating jobs but hopeless at generating pay rises. Employment is up by more than 300,000 over the past year but average earnings growth at 2.2% is slightly lower than it was in the summer of 2016.

Secondly, while employment has been a lot stronger than was feared in the run-up to the Brexit referendum, the pace of growth eased in the three months ending in August.

It will be well into 2018 before pay growth overtakes inflation - and this relentless squeeze on living standards will have retailers nervous as the key Christmas period nears. Consumers face a choice: tighten their belts or get deeper into debt.

Related: Rising inflation " can't blame the workers this time

1.56pm BST

The pound has dropped against the US dollar since today's jobs and earnings figures were released.

Sterling has dropped by 0.2% to $1.3166, and is a little lower against the euro at a1.119.

Sterling / dollar now back below where it was before the BOE hint at a coming rate hike. Political currency!

"Stronger inflation figures would normally point towards a potential interest rate hike which we know is not too far around the corner. But wage growth is an ongoing concern and an interest rate rise would put pressure on the consumer who is already having their earnings eaten away by inflation.

"Given these factors I believe it is likely that we will see a minor tweak up in interest rates in November but it is not something that I would vote for if I was sitting on the Committee. Concerns around ongoing Brexit discussions and its prevailing uncertainties have only been deepened by today's disappointing wage growth figures."

12.57pm BST

Here's our economics correspondent, Richard Partington, on today's labour market report:

The lowest levels of unemployment since the mid-70s are still failing to boost the bargaining power of workers in the UK, as official figures show a sixth month of negative real earnings.

Average earnings increased by 2.2% in the three months to August, the same level recorded in the three months to July after a revision to the earlier figures, according to the Office for National Statistics. City economists had forecast growth of 2.1%.

Related: Real wages fall despite low levels of unemployment

12.28pm BST

Over in parliament, prime minister Theresa May and Labour leader Jeremy Corbyn have sparred over today's labour market figures.

Corbyn welcomed the drop in unemployment ('a first', according to May), before arguing that the fall in real wages shows the economy is weak. What's the government going to do about it?

"I wonder if the PM could do a first, and answer a question?": @jeremycorbyn pushes @theresa_may on the cost of living at #PMQs pic.twitter.com/nFgf4lKyaX

Brexit has made it far harder for the Tories to claim "economic credibility" - one reason for Corbyn's win today. #PMQs

#PMQs in Brief: Corbyn had his Weetabix for breakfast, May skipped breakfast. He was good, she was bloody awful

Clear theme to JC's approach today: Tories presiding over a weak economy. Highlights falling real wages, rising personal debt.

12.12pm BST

Britain's youth unemployment rate has fallen to 11.9% over the last year, from 13.7%.

That's because fewer 16-24 year olds are looking for work, and more are in full-time education (or economically inactive for other reasons).

"We have a youth debt epidemic and, as prices rise and wages remain low, this is only set to worsen. It's time for action.

"Young women in particular are getting stuck on low pay, falling into debt and using foodbanks to put food on the table. It can be especially hard for young mums; in many cases, low pay means an hour's childcare can cost more than an hour's wages.

Join Nia and us in calling for the National Living Wage to be extended to young people. #Petition #NotWorthLess: https://t.co/nQIWiYlF78 pic.twitter.com/4H3ZwtyIXh

11.17am BST

Estate agents and hairdressers are suffering some of the tightest wage squeezes, today's report shows.

City workers, administrators and IT staff, though, are getting inflation-beating pay packets:

11.01am BST

Britain's employment rate has fallen back from its record high.

The proportion of 16-64 year olds in work dipped to 75.1% in the three months to August, down from 75.3% a month ago.

Probably just a blip, this small dip in the employment rate, but one to watch.... pic.twitter.com/WYXTVKFXwd

10.46am BST

Here are more figures from the Resolution Foundation, showing how the wage squeeze will intensify in the run-up to Christmas.

Latest RF pay projection following average earnings figures today and inflation yesterday - pay squeeze set to deepen in the coming months pic.twitter.com/FWsB2Cc1tG

10.41am BST

A handy breakdown of the UK labour market:

32.10m people in work and 1.44m unemployed people for Jun-Aug 2017 pic.twitter.com/OZ0gPvMYok

10.39am BST

This graph shows how UK unemployment fell to 4.3% in the last quarter.

There are now 1.44 million unemployed people in the UK, down 215,000 in the last year.

10.26am BST

Britain's bosses (the men and women with their hands on the purse strings) argue that productivity needs to rise so they can deliver wage increases.

Matthew Percival, CBI Head of Employment, says the government can, and must, help:

"Persistently weak productivity, coupled with falling real wages, continues to hit living standards, underlining the need for the Chancellor to bold in his Budget.

"Delivering urgent progress on large and small infrastructure projects, addressing underfunding in education and providing practical support for innovators are all steps the Government can take as part of a meaningful Industrial Strategy to boost productivity, the only sustainable route to improving people's pay."

10.23am BST

The Resolution Foundation have spotted that average earnings (adjusted for inflation) are no higher than they were back in February 2006, thanks to this latest slump in real wages.

Stephen Clarke, their economic analyst, explains:

"Today's figures confirm the big picture trend that the UK labour market is great at creating jobs, but terrible at raising people's pay.

"The scale of the pay squeeze over the last decade is so vast that people today are earning no more than they did back in February 2006, despite the economy being 4.4 per cent bigger per person since then."

Average pay falls back to February 2006 levels as jobs market holds steady @stephenlclarke on today's @ONS figures https://t.co/gpxpypjetP pic.twitter.com/mD9HeIrklT

10.17am BST

Geraint Johnes, professor of Economics at Lancaster University Management School, has spotted that workers in the financial sector are getting decent enough pay rises....

The 3 month average measure of total pay growth indicates that earnings have risen by 2.2% over the last year. This represents no change on the previous month. There has been some acceleration in pay in the financial and business services (where pay growth is now 2.7%, or, on the less reliable single-month measure, 3.1%).

But in many industries - including the public sector, manufacturing, construction and distribution - pay growth is still below 2%. This does not suggest that it is yet time for the Bank of England to be hiking interest rates."

10.12am BST

Jeremy Cook, Chief Economist at WorldFirst, fears that UK unemployment will soon start to rise.

He argues that the wage squeeze means consumers will spend less in the shops, hitting profits and forcing firms to lay off staff (creating something of a vicious circle...)

"The story of the labour market remains the same: more people earning weaker wages. These figures do nothing to change our belief that a lack of real wage gains are going to continue to impinge on the ability of consumers to remain the driving force of UK growth.

"The pace of price increases is at a near-term high and the next few months may also mark the peak of employment. UK businesses, particularly those who import from abroad or are part of global supply chains, have laboured under a slowing economy and higher costs courtesy of the falling pound. Should neither consumption or investment provide these companies - particularly retailers - with a strong Christmas, then we would expect to see the 'good' news of falling unemployment start to reverse as businesses react to lost margins cutting into the corporate bone."

10.07am BST

Real wages will probably keep shrinking for many more months, warns James Smith of ING:

Crunching the numbers, we don't expect wage growth to go much above 2.1% or 2.2% before next summer.

So whilst we expect headline inflation to peak at 3.1% next month, the gap between CPI and wage growth is likely to stay fairly wide for some time to come.

10.06am BST

Maike Currie, investment director for Personal Investing at Fidelity International, says the rise of the 'gig' economy, and the government's public sector pay cap, are partly to blame for the wage squeeze.

"Another month, another fall in real household incomes. Today's wage growth figures show our total earnings including bonuses grew at just 2.2% in the three months to August . With yesterday's CPI figures showing inflation spiking to an eye watering 3%, the gap between our pay packets and the cost of goods and services continues to remain vast - our wages are not keeping up with the rising cost of living.

"The absence of wage growth remains the missing piece of the puzzle in the UK's slow road to recovery - high employment should be the worker's best friend because that's what pushes up wages. With UK unemployment at a 45-year low, one would think that workers' bargaining power at the wage negotiation table would improve, yet earnings growth remains elusive and the UK's workforce is getting poorer. There are many potential reasons for this ranging from poor productivity to the squeeze on public sector pay and the rise of self-employment in the so-called 'gig economy'.

10.01am BST

The employment minister, Damian Hinds, has welcomed the news that Britain's unemployment rate remains at a 42-year low, with 32.10 million people in work (up 317,000 in the last year.).

Hinds says:

"Our economy is helping to create full time, permanent jobs which are giving people across the UK the chance of securing a reliable income.

"We've boosted the income for people on the lowest pay by increasing the National Living Wage and delivered the fastest pay rise for the lowest earners in 20 years.

9.52am BST

Andy Bruce of Reuters has spotted that workers in the hospitality industry are suffering a sharp pay squeeze:

One thing stuck out from UK #pay data - retail/hotel/restaurant pay growth plummeting, now weakest in almost 3 years pic.twitter.com/dPG7e8GcuG

9.48am BST

British workers have now suffered six months of falling real wages, as this chart shows:

"Pay packets are taking a hammering. This is the sixth month in a row that prices have risen faster than wages.

"Britain desperately needs a pay rise. Working people are earning less today (in real-terms) than a decade ago.

9.36am BST

Breaking! Wage growth across the UK is still lagging behind inflation, even though the unemployment rate remains at its lowest level in 42-years.

Average earnings, excluding bonuses, rose by 2.1% per year in the three months to August. That's down from 2.2% a month ago.

The Office for National Statistics says unemployment fell by 52,000 to 1.4 million in the three months to August

9.27am BST

Over in Frankfurt, ECB president Mario Draghi is making another push for 'structural reforms' in the eurozone.

Draghi's arguing (once again) that political leaders have a 'window of opportunity' to reform their economies, thanks to the eurozone's current record low interest rates and QE programme.

Unlike what happened in the years even before the crisis, labour market reforms must be preceded - or least accompanied by - product market reforms, otherwise wage adjustments will not be fully passed on to prices. Instead, profit mark-ups will rise and the purchasing power of households will fall, thereby worsening the economic conditions of consumers and aggravating any recession.

During the crisis, because of powerful vested interests, labour market reforms were not accompanied by product market reforms in some countries, and so wages fell and prices did not adjust in tandem.

Strangely low turnout as #ECB #Draghi asks whether structural reforms mean "torture". (Cue: he doesn't think they do) pic.twitter.com/t4udGWMh7m

9.09am BST

We have fresh evidence that London's property market is cooling, from estate agent Foxtons.

UK RNS today #2 - Foxtons - inline but required cost control as 'modest growth' and downward pressure on rents

8.56am BST

Rob Holdsworth of the Resolution Foundation tweets:

Yesterday's inflation figures were bad for everyone under the age of 65. This morning we should get some good news on jobs - another record?

The UK employment juggernaut expected to rumble on - consensus is for an addition of 150k to employment. pic.twitter.com/nHOiQ7hPw6

8.43am BST

Today's average weekly earnings figures will be 'key' for the markets today, says Marc Ostwald of ADM Investor Services:

No change is seen in headline terms at a still very lowly 2.1% y/y, while the 'core' ex-Bonus measure is forecast to dip to 2.0% from 2.1%.

This will leave real earnings deep in negative territory, leaving plenty of room for doubt on whether wages are turning or have turned a corner as some MPC members have claimed, and certainly beg the question on the need for, or the wisdom of a rate hike.

No change expected in either measure of the UK unemployment rate. ILO measure for September expected to be 4.3% & claimant count 2.3% pic.twitter.com/yinWc95LNV

8.35am BST

This chart from economist Rupert Seggins shows how UK real wages have been shrinking for several months.

UK labour market stats out today and as per usual, the big news happened yesterday with the 3% inflation figure confirming more pay squeeze. pic.twitter.com/13CkopXMUv

8.07am BST

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

Related: UK interest rate rise likely as inflation hits 3%

Once again though, the unemployment data is expected to paint one picture with the rate remaining at 4.3% while average earnings paints an entirely different one, as wages rise by only 2.1%.

Negative earnings growth is one of the factors that is likely to weigh on the economy going forward and makes the BoE's decision on interest rates all the more difficult.

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Related: Xi Jinping heralds 'new era' of Chinese power at Communist party congress

Wishful thinking in early coverage of Xi's Party Congress speech (now at more than three hours) pic.twitter.com/DIXYZPVys4

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