UK employment falls amid Covid-19 crisis; S&P 500 fails to hit record high - business live

Graeme Wearden

from on 2020-08-11 15:57 (#56RWM)

Rolling coverage of the latest economic and financial news, as nearly three quarters of a million people drop off payrolls since March

Latest: S&P 500 approaching February record high
UK payrolls have fallen by 730,000 since crisis began
ONS: Worst quarter for jobs since the financial crisis
Average earnings fell in April-June as bonuses and hours cut
But unemployment rate sticks at 3.9%

9.10pm BST

A late update: The S&P 500 failed to hit that all-time high, as doubts emerged over whether Congress will actually pass a stimulus package.

Stocks are tumbling after McConnell said on Fox News what we've all been telling you - that stimulus talks are at a stalemate.

McConnell on Fox says the negotiations stalemate needs to end:

"It doesn't make any difference who says let's get together again, but we ought to get together again because there hasn't been a meeting of any consequence between the 2 parties since last Friday. That is too long."

4.57pm BST

Finally, European stock markets have ended the day with solid gains.

In London, the FTSE 100 finished at its highest level in over two weeks, up 103 points or 1.7% at 6154. Betting firm GVC finished top of the pile (+9.6%), along with airline group IAG (+8.4%), and broadcaster ITV (+5.8%).

4.35pm BST

Edward Moya of OANDA says three factors are pushing stocks higher on Wall Street:

A trifecta of positive news is helping the S&P 500 march closer to record high territory. US stocks, except for mega-cap tech are rising after Russia approved the world's first COVID-19 vaccine, President Trump is seriously contemplating a capital gains tax cut, and after a better than expected German survey and US economic data.

The rotation out of tech continues, but for record highs to be sustained, US-China relations need to see a major de-escalation.

4.32pm BST

Speaking of Boeing... the aircraft maker has just posted another month of negative orders.

That's because it didn't win any new business in July, while customers cancelled previous orders for 43 of its troubled 737 Max planes.

This year through July, Boeing has net negative orders of 836 planes, including aircraft the company took out of its backlog of orders awaiting fulfillment. Boeing routinely removes orders from its running tally when customers are financially strained, among other reasons. The July adjustments trimmed the Chicago-based plane maker's backlog to 4,496 orders.

Most of the 737 Max cancellations were from aircraft leasing companies.

JUST IN: Boeing reports its 6th straight month of negative orders. https://t.co/J8PwRXlKBA pic.twitter.com/sRwDNpwI9v

4.08pm BST

Back in the UK, Professor Costas Milas of the University of Liverpool has warned that the unemployment rate will surge if the government winds up its furlough scheme (as it plans).

He tells us:

Today's very low unemployment rate figure of 3.9% highlights the increasing risk of the Bank of England getting it wrong.

The Bank predicts [last week] that the unemployment rate will peak at 7.51% by the end of 2020. This forecast is surely influenced by the stubbornly low current unemployment rate. When the job retention scheme is dropped, the U.K. unemployment rate will almost certainly take off. Which basically suggests that we will witness a big and prolonged rise in unemployment well into 2021 (and possibly beyond).

4.00pm BST

Markets are also being lifted by the surprise news that Russia has approved a Covid-19 vaccine for widespread use after less than two months of human testing.

The vaccine, which will sold abroad under the brand name Sputnik V, has already been tested on humans, including one of Vladimir Putin's daughters. However, in its eagerness to bring the drug to market, Moscow hasn't yet conducted phase 3 large-scale safety trials.

It's been an absolutely stellar session for markets in Europe today driven higher by hopes of a new US stimulus plan with President Trump's recent executive orders being used as a starting point baseline, a possible capital gains tax cut, as well as reports of a new coronavirus vaccine, developed by Russian scientists, and which is expected to go into full production in September.

The airline and travel sector has been one of the main beneficiaries of the vaccine reports, with IAG, Norwegian Air and Carnival all pushing higher.

3.51pm BST

Banks, industrial stocks, energy firms and basic materials producers are leading the way on Wall Street, while tech lags.

Aircraft maker Boeing is the top riser on the Dow, up 5.3%, closely followed by JP Morgan.

3.16pm BST

Hopes of a US fiscal stimulus package, or other tax cuts, are lifting many asset prices today, writes Marios Hadjikyriacos of XM.

In terms of catalysts, President Trump said he is very seriously considering" a capital gains tax cut to revivify the economy.

This is old news in a sense as Trump has floated this idea before, but markets may have taken it more seriously this time as the President seems keen to bypass the deadlocked Congress if he can.

2.58pm BST

The US president is getting exciting about the markets again....

Big Stock Market Numbers!

2.51pm BST

Why are markets rallying when the coronavirus pandemic is still raging, debt levels are rising, profits have been hammered and many jobs have already been lost?

Peter Garnry, head of equity strategy at Saxo Bank, says investors are pricing in a new world' of low interest rates, low growth and very loose monetary policy.

If investors are looking through a terrible Q2 earnings season and take the dividend futures curve at face value, what then are investors pricing? In our view, investors are pricing a new future which means stronger focus on fiscal impulse via monetization (the magic money tree"), technology eating more of the world's value, lower growth rates and lower yields for longer.

As we have talked about in recent research notes this creates an environment where large stable technology companies with high ROIC and predictable growth and free cash flow generation will be bid up in value to be bond proxies. This will accelerate equity market concentration to levels not seen since the 1970s with IBM in the lead.

2.50pm BST

Astonishingly, the S&P 500 has now rallied by 50% since its trough in late March:

2.40pm BST

Over in New York, stocks are heading closer to their record highs.

The S&P 500 index, which covers a broad swathe of America's listed companies, has risen by 11.4 points or 0.34% to 3,371.89.

Stocks are mixed at the opening bell on Wall Street. The Dow Jones Industrial Average is up around 300 points and the S&P 500 is higher as well. The Nasdaq is down about a half-percent.

2.00pm BST

After a strong run recently, precious metal prices are sliding today:

Metals taking a hammering:#Gold 1959 -3.38%#Silver 2728 -6.37%#Platinum 944 -4.43%#XAUUSD #Commodities pic.twitter.com/RKNeIQytvE

1.36pm BST

Just in: Prices for finished goods at the factory gate in America jumped last month, and by more than expected.

The US producer prices index rose by 0.6% month-on-month in July, more than reversing a 0.2% drop in June.

PPI MoM (JUL)
Actual: 0.6%
Expected: 0.3%
Previous: -0.2%https://t.co/7YXcYZuXmn

#UnitedStates PPI year-on-year at -0.4% https://t.co/OGznYY6oeC pic.twitter.com/LnNncfRznw

12.47pm BST

Time for a quick recap of the main events.

The UK has suffered its biggest drop in employment since the last recession after the financial crisis. New figures from the Office for National Statistics show that the number of employees in the UK on payrolls is down around 730,000 compared with March 2020.

The decrease in employment on the quarter was the largest quarterly decrease since May to July 2009 with both men and women seeing decreases on the quarter. The quarterly decrease in employment was also driven by workers aged 65 years and over, the self-employed and part-time workers.

Meanwhile full-time employees largely offset the decrease.

The alarm bells couldn't be ringing any louder.

Ministers must act now to protect and create jobs.

And this means extending the job retention scheme.https://t.co/uu9qRCCFH5

12.13pm BST

Prudential, the UK's biggest insurance firm, has said it will split off its US arm Jackson Life to focus on Asia and Africa, a year after spinning off M&G, its UK business.

The move will complete the company's break-up, after pressure from the activist investor Third Point. It plans to either float Jackson on the stock market in the first half of next year (a minority IPO, with full divestment over time'), or demerge it if the market conditions aren't right.

We are not going to lose the talented people who are doing a great job for us in London. There's lots of good reasons for us to be based in London."

12.04pm BST

Debenhams ready to cut 2,500 jobs in new blow to high street https://t.co/zIstGh0xfn

11.53am BST

Debenhams is to cut a further 2,500 jobs in its department stores in the latest blow to hit the high street, my colleague Sarah Butler writes:

The trading environment is clearly a long way from returning to normal and we have to ensure our store costs are aligned with realistic expectations."

11.42am BST

UK high street chain Debenhams is adding to the jobs misery, by cutting 2,500 roles.

Retail Week has the details:

Debenhams is axing 2,500 staff across its stores and warehouses as the business grapples to reduce its cost base.

Retail Week can reveal that the embattled department store chain is scrapping the roles of sales manager, visual merchandise manager and selling support manager as it streamlines its shopfloor teams.

Retail's job casualty list grows. We can reveal Debenhams is axing 2,500 jobs in a fresh cost-cutting drive https://t.co/zggzxojOAl

Another day, another tale of job losses at a major retailer. Debenhams has axed 2,500 roles across its stores and distribution centres as it battles to emerge from the covid crisishttps://t.co/UCRUxcaOou

11.30am BST

Pizza chain Domino's has suffered falling sales and profits during the pandemic, my colleague Julia Kollewe explains:

Domino's Pizza, Britain's biggest pizza delivery chain, suffered a drop in orders during the coronavirus pandemic, as it stopped customers collecting orders and dropped popular choices such as the Cheeseburger pizza, stuffed crust and chicken wings from its menus as part of safety measures.

While more people ordered in pizza, sides and desserts during the Covid-19 lockdown, the company took a hit as it scrapped collection, rationalised its menu to make cooking safer, and incurred extra costs by implementing contact-free deliveries.

11.18am BST

Another sign of strain in the UK labour market:

The number of people on zero-hours contacts has risen to over a million for the first time on record. pic.twitter.com/JIrlP5oQ8H

10.55am BST

Here's our news story on the early popularity of the UK's half-price meal offer:

10.33am BST

Here's a comprehensive thread on today's UK labour market report, from Tony Wilson of the Institute of Employment Studies.

Today's jobs stats: All told, looks like 1.2-1.3 million fewer people in paid work than before crisis began.
A huge fall, but would have been much worse without Job Retention Scheme.
Impacts starting to show through in headline Labour Force Survey measures too. Quick thread... 1/

Claimant count (those on benefits, no or v low earnings, required to look for work) rose slightly in the month to July.
Now up by 1.45m (117%) since March. Highest year on year rise ever, likely 85% of this rise is people with no earnings - i.e. 1.2-1.3 million people 2/ pic.twitter.com/DRUU0yY2DH

HMRC data shows a 730k fall in paid employees over same period. Monthly fall June-July was pretty big (114k) after v small fall previous month.
Appears that around half of this fall is people who still say (or think) they have a job to go back to - but not being paid thru JRS 3/ pic.twitter.com/TCoPvHbMAt

While big falls in self-employment - LFS measure is down by 230k on the quarter, wiping out growth since 2018. Note this fall is only those who say they're no longer self-employed. Likely at least as many who weren't earning but said they'd a business to go back to 4/ pic.twitter.com/tohHBgPDUh

The falls in employment are starting to show up more clearly in the LFS - but so far all of it is translating into rising 'economic inactivity', not unemployment. Not a huge surprise, as this is the full lockdown period (Apr-Jun). And most of rise is people who want to work 5/ pic.twitter.com/beouqbmK0q

The biggest impacts though are on hours worked - fallen to lowest since 1995, reflecting full effects of furlough. This will start to recover from next month, even if the headline employment and u/e figures get worse. 6/ pic.twitter.com/ZNOsOdoY31

Looking at areas and groups, signs from claimant count data that young people still seeing biggest impacts - with largest rise in claimant unemployment, and now nearly 1 in 7 18-24s on the claimant count. 7/ pic.twitter.com/HlzH8c3suU

While for regions, the North East, West Midlands and North West are faring worst. One in ten of workforce in North East is claimant unemployed. However the biggest % increases have been in London and the South East - with London particularly hard hit.
Full briefing to follow! 8/8 pic.twitter.com/dgMLkPE53K

Forgot to add vacancies chart! Below. The v slight improvement in July is much better than it looks, as this is a quarterly avg. Single month July was 470k: low, but in line with early 2010s recovery. Driven by smaller employers and covid jobs. If this holds up, then good news. pic.twitter.com/mFJjGccypD

10.22am BST

The UK labour market is in very bad shape, and going to get worse, warns our economics editor Larry Elliott.

He writes that no-one should be fooled by the fact the unemployment is officially just 3.9%. In reality, many more people are out of work, or working much less than they'd like:

The true state of the labour market has been veiled by two things. First, and most obviously, Rishi Sunak's job retention scheme has meant millions of workers have been furloughed since March. In the absence of 80% wage subsidies, many of them would have been laid off.

Second, the way the figures are compiled means that someone is counted as unemployed only if they are both out of work and seeking employment. There hasn't been much point in looking for a job while the economy has been locked down, so people have been classified as inactive rather than jobless. The government's alternative measure of unemployment - the claimant count - provides a better guide to what has been happening. It has doubled since the start of the Covid-19 crisis and rose by 94,000 in July to stand at 2.7 million.

10.17am BST

Just in: Economic confidence in Germany has jumped, on hopes that the country will recover strongly from the Covid-19 pandemic.

The ZEW Institute's index of German economic sentiment has surged to 71.5 this month, up from 59.3 in July. That shows higher optimism for future prospects.

The hope of a rapid economic recovery has increased again, but the assessment of the situation has so far only improved slowly,...

The assessments of the industries show that the experts are assuming a broad recovery, especially in the domestic economic sectors. However, the continuing very poor earnings expectations for the banking sector and insurers with a view to the coming six months give cause for caution.

Germany August ZEW Survey - the surge in economic expectations continues with the index reaching 71.5 in August vs a long-term average at 19.5. This new jump confirms optimism prevails fueled by economic normalisation, hope of beating COVID and continued stock market gains. pic.twitter.com/pJG5G22mTR

Investor confidence in the German economy rose sharply in August, pointing towards higher stock prices. #ZEW pic.twitter.com/w2YoYRictX

Mixed news from Germany's business morale:
ZEW Current Conditions index falls to -81.3, from prev. -80.9 and more than exp. -68.8 but ZEW Economic Sentiment index jumps to 71.5, from previous 59.3 and more than exp. 58.0

Euro-dollar rises towards 1.1800@graemewearden

10.07am BST

Bloomberg economist Dan Hanson fears that the UK's headline unemployment rate will have doubled by the end of the year.

He says:

A sharp fall in employment and the subdued level of vacancies both suggest the labor market has taken a significant hit in recent months.

We expect the true cost to be revealed once the government's furlough scheme ends in October. Our baseline forecast sees the jobless rate peak at 8.5% at year-end."

The UK's labor market crisis is deepening, with signs of much higher jobless rates ahead & wage deflation. Pay excluding bonuses fell 0.2% in Q2 from a year earlier - the first negative reading for basic pay since records began in 2001. https://t.co/xPun22q6yB

9.46am BST

Here's my colleague Phillip Inman on today's UK unemployment report:

Almost three quarters of a million jobs have been lost from company payrolls since the start of the coronavirus pandemic in March, with the youngest and oldest workers bearing the brunt of the employment crisis.

Paid employment dropped for the fourth successive month in July, though the number of employees losing their jobs since the coronavirus outbreak began to slow, according to official figures.

9.33am BST

In another worrying sign, the number of people made redundant has hit a seven-year high.

Redundancies increased by 30,000 on the year and 27,000 on the quarter to 134,000, today's labour market report shows.

9.18am BST

Stock market traders haven't been daunted by news of the biggest quarterly fall in UK employment in over a decade.

Shares have jumped in London, with the blue-chip FTSE 100 index rising by 1.7% or 105 points to 6156.

9.17am BST

This chart shows how the furlough scheme has kept the jobless rate down this summer:

UK unemployment rate remains at 3.9% in three months to June, but doesn't include those on furlough. ONS says 'approximately 7.5 million were temporarily away from work in June 2020'. The number of employees in the UK on payrolls is now down 730,000 compared with March 2020. pic.twitter.com/00Rb5MZcny

9.08am BST

Jonathan Reynolds MP, Labour's Shadow Work and Pensions Secretary, argues that the sharp fall in employment shows that more help should be directed to struggling companies:

Labour has repeatedly warned the Government their one size fits all approach will lead to job losses. These figures confirm what we feared - Britain is in the midst of a jobs crisis.

It is extremely worrying that this increase in unemployment has hit older workers, the self-employed and part-time workers hardest.

8.49am BST

Minister for Employment Mims Davies MP insists the government is taking steps to support the jobs market through the pandemic.

Responding to this morning's drop in employment, she says:

Today's figures show more of the impact the virus is having on both our economy and labour market meaning many people will be understandably concerned about the future - which is why we've set out our Plan for Jobs, to protect, create and support jobs as we build back our economy.

We've already protected more than 9.5 million jobs throughout this period with the furlough scheme, supported more than two million self-employed people and paid out billions in loans and grants to thousands of businesses. Our Eat Out to Help Out scheme is supporting thousands of jobs in the hospitality sector and helping boost confidence, and the key cut to stamp duty has led to a surge in house sales and a welcome boost to the economy.

8.44am BST

As I was saying..... here's TUC General Secretary Frances O'Grady demanding that Rishi Sunak changes course, and extends the furlough scheme.

The alarm bells couldn't be ringing any louder. Ministers must act now to protect and create jobs.

That means extending the job retention scheme for businesses with a viable future who can't operate because of virus restrictions. It means investing in the jobs we need for the future in green industries, social care and across the public sector. And it means ensuring a decent safety net is in place to help those who lose their jobs get back on their feet.

8.42am BST

British finance minister Rishi Sunak has responded to the drop in employment, warning that the government can't protect every job affected by COVID-19.

I've always been clear that we can't protect every job, but ... we have a clear plan to protect, support and create jobs to ensure that nobody is left without hope.

8.30am BST

Average earnings fell across the UK private sector in April-June compared to a year ago, although those in business and finance saw their pay increase.

Earnings also rose in the public sector, as this chart of nominal earnings (ie, before inflation) shows:

8.12am BST

The slump in employment highlights the need for effective test-and-trace systems, says Matthew Percival, CBI Director for People and Skills:

This data shows the devastating mark left on the labour market by the coronavirus crisis. With the UK under stringent lockdown measures to contain the virus in the quarter to June, fall in jobs and hours worked is to be expected.

More positively, there is a small rise in vacancies, particularly in the hospitality sector as restrictions were relaxed.

No sign of a recovery yet in total hours worked in June (probably the best single measure of whether people are actually working). Does not bode well for tomorrow's GDP figures.. pic.twitter.com/W7EZ9wKzIE

Figures for June highlight the effectiveness of the Job Retention Scheme in shielding workers during the lockdown months. But they mask the true state of the labour market, as 730,000 employees lost their jobs in the second quarter.

As the Job Retention Scheme unwinds, we expect unemployment to rise quickly in the fourth quarter. That could see unemployment average over 6% this year compared to only 3.9% at present.

The cracks evident in the latest batch of labour market data are likely to soon turn into a chasm with the unemployment rate rising from 3.9% to around 7% by mid-2021. The 220,000 q/q fall in employment in Q2 (consensus 288,000) was nowhere near as big as the 23% q/q drop in GDP due to the success of the job furlough scheme. And the 300,000 rise in inactivity means that the ILO unemployment rate stood at 3.9% in June, no higher than in February.

Nonetheless, every other labour market indicator was pretty awful.

8.09am BST

Today's jobs report also shows the scale of the economic shutdown in the last quarter, as firms suspended work and furloughed staff.

The amount of work conducted across the UK economy plunged by over 18% in April-June, a record fall, the ONS reports.

Between January to March 2020 and April to June 2020, total actual weekly hours worked in the UK decreased by a record 191.3 million, or 18.4%, to 849.3 million hours.

This was the largest quarterly decrease since estimates began in 1971, with total hours dropping to its lowest level since September to November 1994. Average actual weekly hours fell by a record 5.6 hours on the quarter to a record low of 25.8 hours

8.01am BST

The number of vacancies in the UK has risen, but remains worryingly low.

The Office for National Statistics estimates there were 370,000 vacancies in May to July, up 10% from the record low in April to June 2020.

The increase was driven by small businesses (less than 50 employees), some of which reported taking on staff to meet coronavirus (COVID-19) guidelines.

7.56am BST

BCC Head of Economics Suren Thiru fears that more workers will lose their jobs as the government's job retention scheme winds up in October:

While the headline data continues to lag behind the reality on the ground, the decline in the number of employees on payrolls and hours worked is further evidence of the damage being done to the UK labour market by the Coronavirus pandemic.

The furlough scheme has been successful in preserving millions of jobs. However, with firms continuing to face a perfect storm of increased costs, reduced demand, and diminished cash reserves, unemployment is likely to surge as the government support schemes wind down, unless action is taken.

7.46am BST

These charts, from today's jobs report, show how the Covid-19 pandemic has hurt the UK labour market:

7.39am BST

Here's ONS deputy national statistician for economic statistics Jonathan Athow on today's jobs report:

The labour market continues recent trends, with a fall in employment and significantly reduced hours of work as many people are furloughed.

Figures from our main survey show there has been a rise in people without a job and not looking for one, though wanting to work. In addition, there are still a large number of people who say they are working no hours and getting zero pay.

7.35am BST

Average wages have fallen across the UK economy, due to a slump in bonuses and the impact of the government's furlough scheme.

The ONS reports that regular pay (excluding bonuses) shrank by 0.2% in the April-June quarter, while total pay (including bonuses) fell by 1.2%.

Employee pay growth declined further in June following falls in April and May; growth has been affected by lower pay for furloughed employees since March, and reduced bonuses; nominal regular pay growth for April to June 2020 is negative for the first time since records began in 2001.

Single-month growth in average weekly earnings for June 2020 was negative 1.5% for total pay and negative 0.3% for regular pay.

For the sectors of wholesaling, retailing, hotels and restaurants, and construction, where the highest percentage of employees returned to work from furlough, there is a slight improvement in pay growth for June 2020 compared with April and May; weaker pay growth in some higher-paying sectors negates this at whole economy level.

7.18am BST

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

The number of people in employment in Britain has fallen again, as the coronavirus pandemic forces companies to cut jobs.

Survey data show employment is weakening and unemployment is largely unchanged because of increases in economic inactivity, with people out of work but not currently looking for work.

The clouds of uncertainly are starting to part, and a ray of optimism is breaking through that additions to the US stimulus package are looking more promising as both sides are set to rejoin the negotiating table.

It seems that Trump's executive orders have indeed put pressure on Congress to agree to a broader fiscal package and to at all cost to avoid the political backlash and get the deal done before executive order deadlines around the end of the month expire. I suspect the last thing Congress wants to do is deal with another cliff-edge scenario during an election year as many votes are probably riding on this package.

Global stocks in Risk On mood w/Asia equities advance most in a week after positive handover from Wall St: S&P 500 near pre-pandemic high. Bonds steady w/US 10y at 0.58%. Dollar a tad weaker w/Euro at $1.1750. Gold weaker at $2,014. Bitcoin at $11.8k. pic.twitter.com/aPxoeFQ9yg

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