Bank of England governor says Brexit has made us poorer - as it happened
Mark Carney has told MPs that household incomes will be 5% lower because of Brexit, as he clashes with his own chief economist about the merits of devaluation
- LATEST: Carney says Brexit hurt growth and household income
- Bank of England governor Mark Carney is being questioned by MPs
- Haldane and Carney split over merits of weak pound
Earlier:
- Young women bear brunt of unemployment rise
- Real wages have shrunk for 10 months
- Breaking: UK unemployment rate rises to 4.4% - first rise since 2016
5.00pm GMT
Time for a recap.
It's uncertainty about what's the relationship going to be with our biggest trading partner...Why wouldn't you hold back if that's going to be materially affected?
A combination of the weaker pound, and a stronger global economy, has worked its magic.
Depreciations don't work. The have an economic effect, but they're not a good economic strategy.
They may be an outcome of various things... but it's how you make yourself poorer.
This qualifies as a wee smack-down? #Haldane #Carney pic.twitter.com/dmMVeuv1YQ
Historically the thing that has really killed jobs has been central banks stepping on the brakes too late.
4.34pm GMT
The session ends with Nicky Morgan MP congratulating Andy Haldane on his recent school visits.
I hope it will help with our pipeline of economists in the future, she signs off.
4.31pm GMT
Carney also swerved a question about whether the financial markets expects a Brexit transition deal to be agreed at an EU summit in March.
It's in no-one's interests for talks to collapse, he suggests.
Nice dodge by Carney of loaded question on what will happen to sterling if no transition is agreed in March: "It's not in the interest of either party to have a total falling out..."
4.29pm GMT
The Bank's policymakers are now asked about the recent stock market turmoil, and whether shares are now in a bubble.
Mark Carney points out that volatility had fallen to extremely low levels, so a rise in volatility is not a threat.
Pickup in volatility is "small potatoes" in policy terms, says Mark Carney.
Possibly a Jersey Royal. He did not say.
4.21pm GMT
Bank of England Mark Carney and chief economist Andy Haldane just disagreed, publicly, over the merits of a weaker currency.
Haldane kicked things off by telling the Treasury committee that half of the growth in the UK economy in the last year came from net trade.
A combination of the weaker pound, and a stronger global economy, has worked its magic.
That has meant that net trade has been a significant contributor, and expect those effects to continue over the next two or three years.
Depreciations work, and that's how they work.
Depreciations make people poor.
Depreciations don't work. The have an economic effect, but they're not a good economic strategy.
They may be an outcome of various things... but it's how you make yourself poorer.
SPLIT ON THE MPC! Haldane (on rebalancing an economy): "Depreciations work." Carney immediately after: "Depreciations don't work. It's how you make yourself poorer."
4.10pm GMT
Mark Carney emphasises that the Bank doesn't have full clarity on Brexit yet - but it should learn a lot more this year.
Maybe there are some people in the country who know exactly what the adjustments are going to be, but I'm not one of them.
4.03pm GMT
Q: Your forecasts assume a net contribution to GDP from trade every year over the forecast period. Are you assuming a smooth Brexit transition, and a comprehensive free trade deal?
We are assuming a smooth transition, and an average of outcomes, says Mark Carney.
3.59pm GMT
Here's a video clip of Mark Carney's testimony.
Britain's interest rates will rise gradually but Brexit remains the biggest uncertainty, Mark Carney says https://t.co/z4Wb2DHtuh pic.twitter.com/V0SZkVH31f
3.55pm GMT
Q: If net inward migration falls even more than the Office for Budget Responsibility forecasts, you don't see a significant impact on the economy?
You would see an impact on the overall speed limit of the economy, the potential growth of the economy, Mark Carney replies.
3.51pm GMT
The Treasury committee are back from their vote, and John Mann MP is probing the Bank of England about migration.
He's suggesting that the first wave of EU migrants into the UK were better educated than today's arrivals. If so, that could affect their propensity to spend, to buy a house, and to move out of the UK.
3.33pm GMT
Business Insider have a good write-up of Carney's comments about the Brexit vote hitting real incomes:
Bank of England Governor Mark Carney said on Wednesday that real incomes are set to be 5% below pre-referendum forecasts by the end of this year.
Appearing before the Treasury Select Committee on Wednesday, Carney said that British incomes are currently 3.5% below where the central bank had forecast them to be prior to the June 2016 vote to leave the European Union.
Mark Carney: People are earning 3.5% less than we estimated before the EU referendum https://t.co/XILvNcQ7kM pic.twitter.com/SNmM1x3f5q
3.30pm GMT
Asked about migration, Andy Haldane says the evidence shows that the impact on wages is "relatively modest".
The session is then interrupted because MPs have to go and vote.
3.22pm GMT
Q: Are you saying that things are looking rosier in the economy, asks Charlie Elphicke MP?
Marginally, says MPC member Silvia Tenreyro, cautiously.
3.19pm GMT
Does Britain have a problem measuring productivity?
You can more easily count the number of widgets than the contribution of YouTube to the economy, says deputy governor Ben Broadbent, explaining that it's harder to measure productivity in a services economy.
3.16pm GMT
The key message from the Bank of England is that they believe wages are 'firming' .
Carney and Haldane optimistic on wage pressures.... $GBP likey
Bank of England governor Mark Carney says a variety of indicators are consistent with firming wage pressures and that the Phillips curve is alive and well.
FAO @D_Blanchflower
3.14pm GMT
The long-awaited pick-up in wages is starting to take root, says Andy Haldane.
January to April is a 'crucial time' for wage negotiations, he adds, suggesting some companies will be offering pay rises 'starting with a three'.
3.07pm GMT
Deputy governor Ben Broadband agrees that Brexit uncertainty is making UK companies delay taking big, irreversible decisions.
The depreciation of the pound has pushed up the cost of investment goods, as well as consumption goods, he explains.
3.04pm GMT
Q: Why has the UK gone from being one of the fastest G7 economies to the slowest, asks Labour MP Rushanara Ali.
Mark Carney agrees that Britain has moved "from the top of the pack to the bottom".
2.52pm GMT
Q: Doesn't fiscal policy have to do more to encourage productivity growth?
Carney resists the temptation to comment on government tax and spending.
It's uncertainty about 'what's the relationship going to be with out biggest trading partner?'. It means that for this year, why wouldn't you hold back if it's going to be materially affected?
2.48pm GMT
The UK recovery has been 'very jobs rich', says Mark Carney. But the downside is the weak productivity growth which
[reminder: today's productivity figures were encouraging]
2.46pm GMT
The Bank of England's chief economist, Andy Haldane, suggests that the 'speed limit' for the UK economy is current 1.5%.
BOE'S HALDANE SAYS 'SPEED LIMIT' FOR UK ECONOMY IS AROUND 1.5 PCT: RTRS
Historically the thing that has really killed jobs has been central banks stepping on the brakes too late.
As [former Federal Reserve chair] Janet Yellen says, recoveries don't die of old age, they die because banks step on them, because they react too late.
2.39pm GMT
Here's a handy chart, showing how the financial markets now expect the Bank of England to raise interest rates faster, compared to the end of October.
Governor Carney says hawkish signal in Feb was made relative to UK rate curve at time of Nov meeting. 1 additional hike priced in since, but no signs of a shift in timing (ie, markets truly bringing forward expectations for hiking). Still a +ve #GBP story to come from #BoE story pic.twitter.com/OthJrxP6Xp
2.34pm GMT
Mark Carney adds that interest rates won't return to the pre-crisis average of 5%.
Q: Can you narrow down when rates might rise?
2.30pm GMT
Q: You say in this month's quarterly inflation report that the Bank is likely to raise interest rates earlier and faster than expected in November. So what were the expectations then, and what are they now?
Mark Carney explains that November's forecasts were based on a 'conditioning path' of two interest rate rises over the forecast period.
And we're off! pic.twitter.com/tnqXJJI68u
2.19pm GMT
The session begins with Nicky Morgan, the chair of the Treasury committee, reminding Mark Carney that he recently told the BBC about his ability not to answer questions.
I hope we won't have that this afternoon....
2.15pm GMT
Over in parliament, the Treasury committee are about to interview the Bank of England about its latest quarterly inflation report.
They'll be hearing from BoE governor Mark Carney, deputy governor Ben Broadbent, chief economist Andy Haldane and MPC member Silvana Tenreyro. It should be streamed live here.
Later on today, we're taking evidence from Dr Mark Carney and other representatives of the @bankofengland on its inflation report. Watch it live from 2.15pm here: https://t.co/rpLWjif0Hr pic.twitter.com/e3YNSf0629
2.04pm GMT
Here's my colleague Richard Partington on today's UK unemployment figure:
The number of people out of work in Britain rose at the fastest rate in almost five years, official figures showed on Wednesday, fuelled by an increase in unemployment among young people under the age of 24.
After an almost two-year period of continuous declines in unemployment to the lowest levels since the mid 1970s, the number of people out of work rose by 46,000 to 1.47 million in the three months to December, according to the Office for National Statistics. The jobless rate rose to 4.4% against City forecasts for the level to remain unchanged at 4.3%.
Related: UK unemployment rises at fastest rate in almost five years
1.43pm GMT
Alongside the unemployment figures, the Office for National Statistics also reported that UK productivity has risen.
Output per worker per hour jumped by 0.8% in the fourth quarter of 2017. That's an encouraging sign.
The real game changers for productivity will lie in adoption of advanced technologies, infrastructure investment and reskilling of the workforce for the industries of the future. In particular, the UK must capitalise on its strong base of expertise in artificial intelligence, robotics and autonomous vehicles.
The potential is huge-our research shows AI could provide a 614bn boost to the UK economy by 2035. AI can not only drive greater efficiency, but enhance the productivity of the workforce and spur greater innovation in the economy. The technologies are there and the UK businesses can get a head start in this race."
oh cool they're literally building them to fight people now https://t.co/lxu74B2Ys7
1.29pm GMT
As this charts shows, the female unemployment rate in the UK has risen from 4.1% in the autumn to 4.4% by the end of 2017.
1.17pm GMT
Britain's employment minister, Alok Sharma, has welcomed the news that employment has risen - by 321,000 in the last 12 months.
Sharma says:
"Today's figures show that this Government is building a fairer economy that supports people from all backgrounds."
Great news as employment remains high with over 3 million more people in work since 2010 pic.twitter.com/Dd3xqqvGX2
"The rise in unemployment is further evidence of the Tories' economic failure, which has resulted in regional inequalities, wages failing to keep up with prices and millions of workers trapped in low paid, insecure work.
"Eight million people in working households live in poverty and the number of children in poverty is set to soar to a record 5.2 million over the next five years."
12.54pm GMT
The pound is continuing to drop following the news that UK unemployment has risen.
It's now trading at $1.392 against the US dollar, down 0.7 of a cent. It's also down 0.2% against the euro at a1.1312.
Sterling is coming under a bit of pressure this morning after UK jobs data for the three months to December showed wages still growing at a moderate pace and unemployment ticking up to 4.4%.
While a higher reading on wage growth may have triggered a more bullish response from the pound, the data turned out to be quite insignificant as it's unlikely to change the views at the Bank of England.
12.02pm GMT
The Resolution Foundation have sent over some charts, showing how UK real wages are still shrinking - even though basic pay growth rose to 2.5% in the last quarter.
11.55am GMT
Matthew Percival, head of employment at the CBI, argues that business are doing their bit by creating more vacancies than ever before:
"Rising unemployment is disappointing, but job vacancies reaching another record shows that businesses are creating opportunities. This underlines why skills, including retraining, need to be at the heart of our industrial strategy so that everyone can benefit from the opportunities created by economic growth.
"Meanwhile, slowing productivity growth and rising pay growth makes an interest rate increase more likely."
UK unemployment rose in Q4 2017, but this was mostly driven by flows from falling inactivity. Employment continued to grow solidly, by 88k on the quarter pic.twitter.com/BtkDn2Y0VE
11.02am GMT
Most of the 46,000 people who joined the unemployment total last month were women.
The ONS reports that the number of unemployed women jumped by 35,000 in October-December, to 689,000.
UK jobless rate rises, reflecting economically inactive people entering unemployment.
Employment still rising (although not as fast as in @ReutersPolls economists expected).https://t.co/RxroveYL7N pic.twitter.com/nW5sypURhc
"The increase in unemployment we can see today has been driven by young women being out of work.
"21,000 more young women are now unemployed - a dramatic increase on the last quarter. Young women's unemployment is now at its highest level since summer 2016. We should see this as a warning sign.
Related: Discriminating against pregnant women is not just wrong, it's foolish | Rowan Davies
10.43am GMT
Geraint Johnes, professor of economics at Lancaster University Management School, says today's report paints a 'mixed picture'.
The number of unemployed has risen by 46000 over the last three months of 2017, so that the unemployment rate now stands at 4.4%. The increased unemployment has been quite uneven across the UK, with marked increases in Wales, Scotland and the East but falls in some other regions.
Meanwhile across the UK the number of workers in employment also increased, as a result of a fall in the numbers who are economically inactive.
BREAKING: Unemployment fell in the West Midlands between October and December, down 2,000 to 153,000, new @ONS figures reveal. But the national figure jumped 46,000 to 1.47m due to big rises in Wales and the East of England pic.twitter.com/PhzgLI2cUg
10.40am GMT
Ian Brinkley, acting chief economist at the Chartered Institute of Personnel and Development, reckons the UK jobs market is running out of steam.
But the better news is that wages should finally overtake inflation soon.
"The substantial and unexpected rise in unemployment is a clear warning that the UK labour market may be running out of steam, but there are reasons to believe that this is a one-off, as opposed to the beginning of a larger employment crisis. There has still been a significant rise in employment dominated by an increase in full time, permanent jobs, while some of the rise in unemployment may be attributed to more students entering the labour market.
"The strengthening of wage growth is also a welcome sign as, when coupled with likely falls in inflation, it opens up the possibility of real wage growth in the coming months, which will be a great relief to those workers who have seen their pay packets squeezed for months on end."
10.34am GMT
John Hawksworth, chief economist at PwC, has dug into the jobs data -- and reports that it's not all bad news.
"There was an unexpected rise in unemployment between the third and fourth quarters of 2017, but closer inspection suggests this is not a sign of labour market weakness as it was also accompanied by a healthy rise in total employment, focused on full-time jobs.
Instead, it reflects more previously inactive people seeking work, some of them finding jobs and others still searching and so being classified as unemployed.
10.27am GMT
The TUC have calculated that real wages have now been falling for 10 months in a row.
That's because regular earnings have consistently lagged inflation since early 2017 (when the plunge in the pound after the Brexit vote drove up import costs).
"The great pay squeeze continues. This is the tenth month in a row that real wages have fallen.
"Britain's cost of living crisis is pushing families to the brink. But the government is failing to act.
"These statistics reiterate what we all knew, wages aren't rising in line with inflation meaning the pounds in our pockets will buy us less. It's great more people are in work, however, with prices rising faster than our pay packets, keeping a tight budget is a must.
"Our disposable income is still under pressure although employment rates are high they have fallen slightly, and wages just aren't keeping up. It's so important you make the most of your money and are savvy with your finances. You could save hundreds of pounds by simply switching your energy supplier or transferring old debt onto a credit card that doesn't charge you interest for a set amount of time."
10.16am GMT
Professor Costas Milas of the University of Liverpool says today's labour market statistics give the Bank of England 'a lot to think about'.
He believes it could deter some Monetary Policy Committee policymakers from raising interest rates in May.
Although basic pay, up to 2.5% (from 2.4% previously) seems to be heading towards the MPC's forecast of 2.75% by 2018Q3, the rise in unemployment rate from 4.3% to 4.4% is a surprise. Only a few days ago, the MPC's expectation was for an unemployment rate of 4.3% in 2017Q4, a further (albeit slight) drop to "around 4.25%" up until 2018Q3 and a further drop to 4.1% by 2021Q1. It was this forecast that fuelled expectations of higher, than previously thought, interest rates on the grounds that the economy would be able to afford an increase in the policy rate without a damaging impact on unemployment.
Today's unemployment rate is potentially a turning point on the thinking of MPC members. It is more likely than not that they will want to see a reversal of this rise in unemployment in the next few months before contemplating another interest rate hike in May 2018.
UK unemployment rate in the three months to December unexpectedly rises to 4.4% from 4.3%, the first increase in two years. Far too early to read too much into one data release, but worth monitoring amid talk of possible interest rate hike and Brexit uncertainty.
10.05am GMT
Public sector walkouts have hit their lowest level in at least 21 years, today's report shows.
Just 44,000 days work were lost to strikes in the public sector during 2017, the ONS says. That's the lowest figure since records began in 1996.
9.52am GMT
Today's report shows that UK firm are struggling to find workers, even though unemployment has risen.
The number of vacancies hit a record high in the last quarter, up 24,000 to 823,000.
Despite headline increase in UK #unemployment (+46,000) the underlying data on labour demand was relatively strong. Further increase in #vacancies to all time high and declines in involuntary part-time working to <12% pic.twitter.com/0AnbojPB6k
9.44am GMT
Economist Rupert Seggins points out that Britain's wage squeeze continues, despite average earnings growth picking up:
Uptick in UK pay growth still not enough to offset the real pay squeeze. Real earnings (excl. bonuses) down -0.5%y/y if you like CPI best or -0.3%y/y if CPIH is more your cup of tea. pic.twitter.com/NV4G4Kn2wl
9.44am GMT
This chart shows how Britain's jobless rate has ticked up, after a long period of falling unemployment:
9.41am GMT
The pound has fallen by half a cent, on the back of the unemployment figures.
City traders are concluding that the Bank of England is less likely to raise interest rates soon while unemployment is rising.... even though wages also picked up.
Typical. Flag a rate hike and the unemployment rate rises.
Traders do not like the idea that the unemployment is ticking higher and wage growth has no real strength.
9.35am GMT
UK wage growth has picked up, but earnings are still lagging behind inflation.
Basic pay rose by 2.5% per year in the three months to December, the Office for National Statistics reports. That's up from 2.4% in the previous month.
9.32am GMT
Breaking! Britain's jobless rate has risen for the first time in almost two years.
The unemployment rate ticked up to 4.4% in the three months to December, up from 4.3% (a four-decade low). The number of people out of work rose by 46,000 to 1.47 million.
9.09am GMT
Growth across the eurozone seems to be slowing this month, but remains pretty strong.
The latest Eurozone 'purchasing managers index' from data firm Markit has fallen to 57.5 this month, down from 58.8 in January.
#Euro Markit Composite PMI Flash at 57.5 https://t.co/zlwVd8AAmO pic.twitter.com/R8HfxBZaS2
"The service sector is enjoying its best growth spell for seven years and the manufacturing sector's performance remains one of the strongest seen over the 20-year survey history.
Flash #France #PMI Composite Output Index at 57.8 in February (4-month low). This level signals +0.7-8% GDP rise in Q1 https://t.co/gjwmawpNMm pic.twitter.com/6vQ6hsS1t4
Germany PMI also declined in February, although less dramatically than in France. Still fairly strong pic.twitter.com/zOJdENzXa6
8.38am GMT
Ouch! Shares in AA have plunged by a quarter this morning to a fresh record low, after the company cut its profit forecasts and outlined a new strategy.
The strategic plan I am setting out today will unlock the full potential of the AA by delivering targeted and strategic investment in our people, our products, our systems and operations. We are building on the solid foundation that our investments since the IPO have created.
It will take the AA from a company helping when you break down to one actually predicting when you might break down in the first place. This plan will deliver front line resource to improve the efficiency, predictability and resilience of our operations as well as investment in game-changing growth drivers - in Connected Car and Insurance. These investments, while reducing our short term profitability, are vital to our long term success.
The AA could do with some roadside assistance of its own. The British breakdown service has shed a quarter of its market value after slashing its dividend and issuing a profit warning https://t.co/aADGsc7SMn pic.twitter.com/ajP6TBa6C4
8.18am GMT
In a boost for long-suffering Lloyds shareholders, the bank has reported its biggest profit since the financial crisis and announced a 1bn share buyback.
Lloyds Banking Group posted sharply higher profits for 2017 and announced plans to return 1bn to shareholders after a "landmark year" that saw the high street lender return to private ownership after its taxpayer bailout in 2008.
The bank reported a 24% increase in pre-tax profit to 5.3bn last year, and said its strong capital position would allow the 1bn share buyback, worth up to 1.4p per share.
Related: Lloyds bumper profits deliver 1bn bonanza for shareholders
7.56am GMT
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Most importantly this means that the pay squeeze continues. Prices are rising faster than wages, and although we expect inflation to subside, real wages are unlikely to rise much before well into 2018 pic.twitter.com/qEALTYw1zw
The earnings figures will be the ones to watch as job creation in the UK has greatly outpaced wage increases. Average earnings has been slow to pick up, and should we see it tick up it could trigger another leg higher in the pound.
The most recent Bank of England (BoE) update showed us they are little on the hawkish side, and they signalled interest rates could rise sooner that some traders thought. If Britons see a respectable jump in wages, then we are more likely to see a rise in consumer spending. Dealers are preparing themselves for the possibility of a rate hike in May and the average earnings could be the catalyst.
Lloyds FY revenues in-line, pre-tax profits miss, extra 600m PPI provision in Q4, FY dividend +20%, up to 1bn share buyback
AA strategic update includes cut to guidance, reduces dividend.
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