Closing post
Time for a recap
Britain’s employment market appears to have weakened, with unemployment rising in the last quarter and employment down.
The latest labour market report shows that unemployment rose by 159,000 in the last three months, to 1.46 million, lifting the jobless rate to 4.3% from 3.8% in the previous quarter.
The increase in unemployment was largely driven by people unemployed for up to 12 months, with economists also concerned that economic inactivity rose.
Headline indicators for the UK labour market for May to July 2023 show:
— Office for National Statistics (ONS) (@ONS) September 12, 2023
▪️ employment was 75.5%
▪️ unemployment was 4.3%
▪️ economic inactivity was 21.1%
➡️ https://t.co/aaVxfzo00f pic.twitter.com/MDvFPLMccd
The weakening sparked calls for the Bank of England to halt its cycle of raising interest rates, weakening the pound, although City traders broadly expect another rise next week, from 5.25% to 5.5%.
But pay growth accelerated, with bonus payments to NHS and civil servant staff pushing up total earnings by 8.5% per year in the quarter, the highest on record.
That should mean a bumper pension increase next April, under the triple lock system….
…except there are reports that the government could tweak the terms of the triple lock to strip out the impact of those bonuses, meaning a smaller increase.
Work and Pensions Secretary Mel Stride has insisted that the UK government remains committed to the triple lock.
The earnings figures could also be used to set rail fare increases across England next year:
High interest rates have pushed more borrowers into missing mortgage payments. The value of UK residential mortgages in arrears jumped to a seven-year high in the last quarter, Bank of England data shows.
Incoming BoE deputy governor Sarah Breeden has predicted that UK GDP will be “relatively flat” over the next couple of years. Breeden also warned MPs that the risks to inflation are to the upside, and that unemployment is likely to rise in the coming months.
In other news…
A pint of beer during the busiest periods will cost drinkers 20p more under a “dynamic pricing” system introduced by Britain’s largest pub group.
Stonegate Group, which owns chains including the Slug & Lettuce and Yates’s, said it was raising prices at 800 of its venues during peak times, such as weekends, to help cover soaring costs.
The owner of Primark said its full-year profits would be higher than previously expected, helped by strong sales of Barbie T-shirts, cargo shorts and boho dresses, as well as price increases.
The company behind the budget clothing chain, Associated British Foods, said cargo shorts, linen blend T-shirts and sliders, as well as boho and paisley dresses and its Moroccan-inspired matching outfits for all the family had all sold well over the summer.
Resale of event tickets for profit should be outlawed, the managers of artists have said, as they called on ministers to reconsider a crackdown on touts and “rip-offs” on websites such as Viagogo and StubHub.
Grocery price inflation in the UK has slowed to its lowest level in more than a year, but it remains in double digits and most consumers still worry about rising supermarket bills.
Annual supermarket inflation dropped for the sixth month in a row, to 12.2% in the four weeks to 3 September, according to the latest data from the analysts Kantar.
The world’s demand for oil, gas and coal will begin to decline this decade in “the beginning of the end” of the fossil fuel era, according to the global energy watchdog.
Work and Pensions Secretary Mel Stride has insisted that the UK government remains committed to the triple lock.
But…. Stride also stressed the need for any increases to take into account “affordability and the position of the economy”.
That’s an intriguing approach, given today’s reports that the UK is considering tweaking how the lock works, to reduce the cost of April’s increase.
Asked whether the triple lock will be based on today’s average annual earnings growth figure of 8.5%, in the three months to July, Stride said:
“There clearly is a difference if you take into account the non-consolidated elements of pay in recent times, but these are all decisions that I have to take with the Chancellor as part of a very clear process, a statutory process actually, that I go through in the autumn.
“So I didn’t want me to get into the weeds of exactly how I’m going to go about that. But the overarching point about the triple lock is that we remain committed to it.”
Put to him that he was not ruling out using a lower figure based on earnings without bonuses, around 7.8%, Mr Stride said: “I’m not going to get drawn into those kinds of questions.”
As covered this morning, basic pay excluding bonuses rose by 7.8% in the last year, less than total pay (which was bolstered by one-off payments in the NHS and civil service staff).
Updated
PA Media have published a handy Q&A on the record increase in UK wages this summer.
Q: What are real wages?
Real wages means earnings growth after inflation is taken into account. Inflation is the term used for the rate at which prices increase over time.
If real wages are positive, it means earnings are rising at a faster pace than prices.In the latest data, real regular wages, not including bonuses, matched the level of Consumer Prices Index inflation in the quarter to July.
This has happened as wages have been surging at a record pace, with employers meeting staff demands for higher pay amid the cost-of-living crisis.At the same time, inflation has been easing back, from a high of 11.1% last October to 6.8% in July.
Q: With wages no longer being outstripped by inflation, does this mean the cost-of-living crisis is over?
While it will come as a relief to many Britons who have been struggling to make ends meet, inflation is still far above the Bank of England’s 2% target, which is set by the Government.
Next week’s inflation figures will be watched closely for confirmation of whether it has eased back further, but there are fears that rising fuel prices in August may push it back up again, which would eat into workers’ pay once more.
Experts also worry that the record rises in wages may reinforce the need for another interest rate hike, which would add to cost pressures on households and businesses through increased mortgage costs.
Q: So it’s not all good news to have record wage growth?
The Bank of England is worried that if wages continue to surge at a record pace, this will fuel inflation further.
There are concerns over a wage-price spiral, when prices continue to rise as a result of higher wages in a self-reinforcing loop.
Firms pass higher staff costs on to consumers in the form of higher prices, while workers have more spending power through higher earnings.
Q: Where are wages set to go from here?
Experts believe that there are signs that wage growth is near the peak and will start to slow soon.
The wider jobs market is beginning to cool, with the unemployment rate increasing to 4.3% in the three months to July, from 4.2% in the previous three months, while vacancies fell below the million mark for the first time since the summer of 2021.
This is set to have an impact on wage demand, as will economic uncertainty caused by the cost-of-living crisis and 14 rate rises in a row.
Q: What does this mean for interest rates?
Many economists believe the Bank may vote to increase rates from 5.25% to 5.5% when it meets on September 21 due largely to the strength of wage growth.
But this may be the peak, according to Samuel Tombs at Pantheon Macroeconomics.
“We still expect wage increases to slow soon... and for the MPC to hike Bank Rate by 25 basis points this month and then call it quits, leaving it at 5.5% until starting to reduce it from the second quarter of 2024 onwards,” he said.
‘Beginning of the end’ of fossil fuel era approaching, says IEA
The world’s demand for oil, gas and coal will begin to decline this decade in “the beginning of the end” of the fossil fuel era, according to the global energy watchdog.
The International Energy Agency (IEA) has projected for the first time that fossil fuel consumption will peak before 2030 and fall into permanent decline as climate policies take effect.
However, the forecast downturn is still “nowhere near steep enough” to put the world on a path to limiting temperature rises to 1.5C above pre-industrialised levels, which is considered crucial to avoiding a climate catastrophe.
The IEA’s influential energy outlook report, due to be published next month, will show that oil, gas and coal are on course to hit a peak this decade under existing climate policies, earlier than many have anticipated.
The value of outstanding balances with arrears inc’d by 13.0% over the 1/4 & 28.8% over the year, to £16.9bn in 2023 Q2, & now accounts for 1.02% of outstanding mortgage balances in arrears. @bankofengland pic.twitter.com/u6dHUQY2d0
— Emma Fildes (@emmafildes) September 12, 2023
Rishi Sunak is concerned about the rise in the number of people with long-term sickness (which we flagged earlier), Downing Street said.
The Prime Minister’s official spokesman acknowledged there is “more to do” to get people back into work but said the Government was committed to supporting removing barriers in the labour market.
“We recognise there is more to do to help get people back into work or into the workforce more generally,” the official said.
“We are introducing a package of measures worth £3.5 billion to remove barriers to the labour market, to support people who would like to work including those with disabilities or health conditions.”
Asked whether the Prime Minister was concerned about the rise in long-term sickness, the spokesman said:
“Certainly, I think that’s why it’s right to have this package of measures.”
2.6 million now out of work due to long-term sickness https://t.co/bopXUm6xix pic.twitter.com/fXq5y5tOFl
— Fraser Nelson (@FraserNelson) September 12, 2023
Data last month showed a record 7.6 million people in England were waiting for NHS treatment in June, with two in five patients waiting more than 18 weeks to be seen.
The increase in the value of UK mortgages in arrears in the last quarter (see 11.05am) is '“worrying, but not unexpected”, says Myron Jobson, senior personal finance analyst at interactive investor.
Jobson explains:
“Outstanding mortgage balances with arrears have ticked higher - although it only accounts for just over 1% of outstanding mortgage balances. The upward trend is worrying but not unexpected. History has shown that the uptick in home repossession typically coincide with increases to the base rate.
While higher monthly repayments could lead to a rise in mortgage arrears the record-breaking wage growth run and relatively low level of unemployment could slow the rise in repossessions. However, with the cost of housing on the up, many homeowners struggling to repay their mortgage of families would be wary that something like a sudden illness or job loss, could leave them homeless.
Bloomberg: UK may adjust calculation for ‘triple lock’ pension increase
Bloomberg are reporting that the UK government is considering changing the way it calculates the pension triple lock, in a move that could save taxpayers up to £1bn.
They say:
Under the plan, the Treasury would strip out a one-time impact of bonuses paid to public-sector workers to end a labor dispute, according to the person, who asked not to be named speaking about measures ministers haven’t yet approved.
The move could be controversial because it touches on Prime Minister Rishi Sunak’s “triple-lock” promise to ensure that state pension payments keep rising. That was a core part of the Conservative manifesto enshrined in legislation and important to the party’s supporters.
If this happened, pensions would increase by less than the 8.5% rise in total pay recorded in the year to May-July, reported this morning, which is expected to push up the pensions bill by £2bn more than expected.
The govt is considering stripping the impact of one-off public sector bonuses out of the earnings data in a move that would save taxpayers up to £1 billion by lowering the uprating of next year’s state pension.https://t.co/PEFdcKWB9l
— Philip Aldrick (@PhilAldrick) September 12, 2023
[Under the triple lock, pensions rise by the highest of inflation, average earnings, or 2.5%]
A spokeswoman for Barclays has pledged the bank will “work closely” with Unite over the 450+ job cuts annouced by the union today, saying:
“We continue to review and adapt our operations based on the ways customers are choosing to interact with us.
“These changes will enable greater collaboration across our teams, allowing us to continue to improve service for customers and clients.
“We are committed to supporting colleagues through this change, working closely with Unite.”
Updated
The Unite union have announced that Barclays are cutting more than 450 staff.
Unite says the decision is “unnecessary and unjustified” which will leave staff gravely concerned about their job security and livelihoods. They plan to meet Barclay’s CEO, C. S. Venkatakrishnan, to push for a guarantee of no compulsory job losses at the bank.
Unite national officer Dominic Hook said:
“How can a profitable finance organisation such as Barclays slash over 450 staff amid a cost-of-living crisis? This isn’t an organisation struggling to survive, this bank is making billions of pounds of profits. If these plans for compulsory redundancy are implemented then hundreds of families will lose their livelihoods and face financial hardship because of a management decision which is both unnecessary and unjustified.
“The staff losing their jobs are not highly paid rich City bankers but those earning modest salaries within Barclays. These employees worked throughout the Covid pandemic to help to deliver the highest customer service to Barclays customers. These workers deserve better.
“Unite is opposed to these job losses and has called on Barclays to commit to no compulsory job losses. The bank must scrap these plans and reconsider. Unite is willing to work with the bank to ensure staff are given re-training and redeployment opportunities.”
BREAKING - Barclays job losses. “How can a profitable finance organisation such as Barclays slash over 450 staff amid a cost-of-living crisis? This isn’t an organisation struggling to survive, this bank is making billions of pounds of profits.."
— UniteFinanceSector (@Unite_Finance) September 12, 2023
Updated
The government says it remains “committed” to the pension triple lock policy, but isn’t yet indicating how much the state pension will rise next year.
The Prime Minister’s official spokesman told reporters today that we must wait for the “formal process” for uprating, following today’s earnings figures (which are expected to be used to set the pension increase in April).
“You know there’s a formal process for this when it comes to uprating but we remain committed to the triple lock which has seen 200,000 pensioners lifted out of absolute poverty after housing costs are taken into account.”
The spokesman was also asked whether the average earnings figure of 8.5%, which includes bonuses, would be used – rather than the figure for basic pay (excluding bonuses), which showed a 7.% rise, replying:
“All those decisions on uprating are taken on a later date, later this year. I can’t pre-empt that work.”
No 10 said the framework for uprating remains “as is published”.
BOE’s new deputy governor warns UK GDP will be flat
The UK economy is likely to stagnate over the next couple of years, the Bank of England’s new deputy governor has warned.
Sarah Breeden, who was appointed Deputy Governor of the Bank of England with responsibility for Financial Stability last month, predicts high interest rates will weigh on the economy.
In a questionaire for parliament’s Treasury Committee, Breeden says:
I would expect relatively flat GDP in the UK over the next couple of years, as the impact of past increases in Bank Rate increasingly push down on demand, and supply remains very weak.
She also warns that the jobless rate is likely to rise in the coming months.
The unemployment rate has been in a tight range from around 4% for several months. I would expect it to rise slightly but remain relatively low in the next few months.
As demand weakens, in the medium term, this will inevitably lead to a rise in the unemployment rate.
Breeden is due to succeed Sir John Cunliffe on 1 November, and will join the Bank’s interest-rate setting Monetary Policy Committee (MPC).
She flags concerns that the UK could suffer a wage-price spiral, saying:
Turning to risks to the UK outlook, I agree with the MPC that the risks to inflation around the August forecast are skewed to the upside. We have learned, in particular, that second-round effects via price and wage setting are stronger than had previously been expected.
The pound has lost ground this morning, as traders have digested signs that the UK labour market cooled last summer.
Sterling is down a third of a cent to $1.2473, wiping out yesterday’s gains, back towards the three-month lows set last week.
Fiona Cincotta, senior financial markets analyst at City Index, says:
Rather than rising on the prospect of another rate hike, the pound is struggling with the possibility of another rate hike hurting the economy further in the second half of the year.
Arrears could rise more sharply in the buy-to-let sector than in the residential mortgage market, predicts Simon Gammon, managing partner at Knight Frank Finance.
He says:
The Q2 data (see previous post) showed a sizable jump in arrears relative to the previous quarter, but the proportion of outstanding mortgage balances in arrears remains low at just 1%. That’s because the vast majority of outstanding mortgages were issued under the post-Global Financial Crisis regime, which was much more stringent when it comes to affordability.
“While mortgage payments at today’s rates are painful and require borrowers to cut their discretionary spending, they are still technically affordable. That’s going to keep arrears low despite steep increases in mortgage rates.
“We are more likely to see arrears in the buy-to-let sector, where landlords face a unique set of challenges. If a landlord finds their mortgage is no longer affordable, or the rent no longer covers their outgoings, they only have two choices - sell or default. If they opt to sell, they may have to wait up to a year for the tenancy to end, unless they are willing to sell with a tenancy in place, which is more difficult. Landlords are also more likely to opt to default than those struggling with a mortgage secured against their main residence, so this is an area to watch.
“Anybody struggling with their mortgage payments should speak to their lender before they default or miss payments. The lenders are required to consider various options for borrowers that are struggling, such as pausing interest payments, moving mortgages to interest only, or offering payment holidays.”
UK mortgage arrears highest since 2016
The amount of UK mortgages in arrears has hit its highest level in almost seven years, as more borrowers struggle to meet their repayments.
New data from the Bank of England shows that the value of outstanding mortgage balances in arrears (by at least 1.5% of the outstanding mortgage balance) increased by 13.0% over the quarter and 28.8% over the year, to £16.9bn in the second quarter of 2023.
This is the highest since the third quarter of 2016.
Home loans with arrears now account for 1.02% of outstanding mortgage balances – the highest since the first quarter of 2018.
This increase follows the steady rise in UK interest rates since December 2021, from 0.1% to 5.25% at present, which has driven up payments on variable-rate mortgages and made new fixed-rate deals much pricier too.
Lewis Shaw, founder of Mansfield-based Shaw Financial Services, fears a ‘mortgage meltdown’ is approaching, unless the Bank of England changes its approach.
Shaw told Newspage:
“The speed at which mortgage arrears are increasing is terrifying and should give cause to pause at the next Bank of England interest rate meeting. This is dire data, and we know that it’s about to get an awful lot worse with 1.6m mortgage holders due to renew over the next twelve months at significantly higher rates than anyone has been used to for well over a decade.
We’re still at the thin end of the wedge, so unless we have a change of direction from Andrew Bailey, we’re about to see a mortgage meltdown for thousands of households that will ripple through the property market for years to come. If this isn’t the canary in the coal mine, I don’t know what is.”
The jump in UK wages this summer shows that collective bargaining by unions works, argues the Unite union.
Sharon Graham, general secretary of Unite, says collective bargaining is putting pounds in the pockets of working people:
“Today’s ONS data is firm proof that collective bargaining with employers reaps rewards for working people, day in, day out. Unite has secured over £400 million through industrial disputes and hundreds of millions more through workplace negotiations in the last two years alone.
“The stark reality is though, millions of workers will still be looking at their payslips and wondering how they’re going to afford rising rents, mortgage payments and bills. The battle to push up pay is far from over and we will continue to fight hard, because, as we’ve seen today – it works.”
Recent pay deals include a 13.1% increase for British Airways staff, a 10.1% rise in pay for South Gloucestershire workers that ended bin strikes, and rises of up to 16% for workers at Gatwick.
Economic inactivity in the UK has risen, with many people unable to work due to ill health.
Today’s jobs report shows that the number of adults neither working nor looking for work rose by 63,000 in the May-July quarter, up to 8.78m.
That lifted the economic inactivity rate up to 21.1%, from 21% in the previous quarter.
The increase was led by more inactivity among 16-24 year olds, which may be due to the summer holidays.
The ONS explains:
The increase in economic inactivity during the latest quarter was driven by those inactive because they were students or inactive for other reasons.
Those inactive because they were long-term sick also increased to another record high. Those inactive because they were looking after family or home decreased to a record low.
Updated
The jump in UK wage growth this summer will likely encourage hawkish policymembers at the Bank of England to vote for another interest rate increase at next week’s meeting.
So says Janet Mui, head of market analysis at wealth manager RBC Brewin Dolphin, who explains:
“Today’s data suggests a continuation of a softening in the UK labour market, for instance, the total number of employed fell by over 200K in the three months to July, while the unemployment rate has picked up to 4.3%.
The problem, and a big headache, for the Bank of England at this juncture is that wage growth remains very elevated, and that is a factor that the BoE judges to drive sticky core inflation. With that in mind, today’s 8.5% total wage growth figure (in which the private sector is +7.6% and public sector is +12.2%) lends support to the hawks for a 25 basis point rate increase in September.
While employment is in general a lagging indicator and wages lag payroll growth, the adjustments in wage growth in relation to a softening economic environment is taking a long time. This ultimately reflects the shortage of labour and unless there is a more painful adjustment in the economy it is difficult for wage growth to slow meaningfully.
The positive development is that workers are seeing wage growth on average outpacing inflation, which means an easing in the cost-of-living crisis.
In terms of the fiscal implication, average wage growth between May and July, which is a staggering 8.5%, is the figure that gets used for calculating the triple lock. The elevated rate means the fiscal position will be kept tight with little room for giveaways by the Chancellor in the Autumn Statement.”
Incidentally, it’s worth noting that the earnings figure on which the triple lock is calculated is not yet set in stone.
The data for earnings in the three months to July (showing the 8.5% rise in total pay) is provisional and may be revised.
The definitive number will be released next month. The ONS says revisions tend to be quite small but might be bigger than usual this year because of one-off payments to NHS staff and civil servants.
English rail fares could rise by 8% next year
English rail fares will rise by up to 8% in 2024 if the Government uses the same formula as this year, PA Media reports.
The Department for Transport (DfT) aligned this year’s cap on train fare increases with Britain’s average earnings growth for July 2022, which was 5.9%.
Figures published by the Office for National Statistics this morning show the same measure for this July alone was 8%.
The DfT has previously confirmed that next year’s fare rises will be below the Retail Prices Index (RPI) measure of inflation for July – which was 9% – but has not announced what formula it will use.
Norman Baker, director of external affairs at pressure group Campaign for Better Transport and former Liberal Democrat transport minister, said:
“The Government has yet to confirm next year’s rail increase, but if it follows the same formula as last year and uses today’s average earnings growth rate, passengers will face eye-watering increases.
“Rather than hammer rail passengers yet again, the Government should freeze rail fares – as they have done with fuel duty – until the long-promised ticketing reform takes place.”
UK jobs market is "clearly on the turn"
With employment levels falling by 207,000 in the last quarter, and unemployment up by 159,000, the UK jobs market is “clearly on the turn”, warns Martin Beck, chief economic adviser to the EY Item Club.
Beck explains:
“Continued strength in pay came despite a rise in the Labour Force Survey (LFS) unemployment rate to 4.3%, 0.5 percentage points up on three months earlier and the highest in almost two years.
The increase was more than accounted for by a sizeable fall in employment. Inactivity rose slightly, breaking the previous downward trend.
Weakening labour demand was also evident in job vacancies dipping below the one million mark for the first time since June 2021.
Resolution: UK suffers biggest employment fall outside of a recession
The number of people in employment in the UK shrank by 207,000 in the last quarter, to 32.88m, today’s jobs report shows.
That, according to the Resolution Foundation, is the biggest employment fall outside of a recession on record, and a clear sign yet that rising interest rates are cooling the labour market.
Hannah Slaughter, senior economist at the Resolution Foundation, explains:
“Britain saw the biggest employment fall outside of a recession this summer. This is the clearest sign yet that the Bank of England’s rate rising cycle is starting to cool the jobs market.
“But while higher unemployment should lead to lower wage growth in the coming months, it certainly hasn’t had that effect yet, with earnings growing at a record pace.
“The short-term pay boost could end up benefiting pensioners more than workers as it is set to deliver a big permanent boost to the state pension next April. In this context it would be wholly unfair to hold down working-age benefits, especially as poorer households are already set to see their incomes fall next year.”
Biggest employment fall outside of a recession on record shows that rising interest rates are making their mark on the jobs market - @hcslaughter_ responds to the latest @ONS labour market statistics this morning. pic.twitter.com/CU5qQ0mltc
— Resolution Foundation (@resfoundation) September 12, 2023
Pay growth continues to present “a conundrum” for the Bank of England” says Yael Selfin, chief economist at KPMG UK.
“The labour market is starting to feel the weight of slowing activity as the UK economy faces several headwinds. The unemployment rate rose to 4.3%, vacancies are down below 1 million, and job-to-job flows have moderated suggesting that workers are less confident to switch positions.
However, earnings growth came in at 8.5% overall and 7.8% excluding bonuses. Today’s pay data has significance not just for monetary policy but also for government spending, as the July figure determines the uprating of pensions next year under the triple lock guarantee.
Despite clear signs of weakening momentum, we still expect the Bank of England to raise interest rates by 25 basis points next week, although the threshold for further increases may be hard to meet given the current economic outlook.”
The UK’s strong wage growth will create challenges for both the Bank of England and the Treasury.
Higher earnings risks keeping inflation higher for longer, while an 8.5% increase in the state pension (under the triple lock system) would leave Jeremy Hunt with less fiscal firepower.
Paula Bejarano Carbo, associate economist at the National Institute of Economic and Social Research, explains:
“Today’s labour market numbers indicate once again that, despite increasing unemployment and falling vacancies, wage growth remains elevated.
Continued high wage growth poses challenges to both monetary and fiscal policymakers. On the one hand, the MPC will need to consider the extent to which this elevated wage growth may continue to generate persistence in inflationary pressures at its meeting next week; on the other hand, today’s data will likely determine another elevated figure for the pensions triple lock, possibly squeezing the tight margin the Chancellor left himself for meeting his fiscal targets.”
UK grocery inflation has fallen
Further good news in the cost of living crisis – grocery inflation has dropped to a new one-year low.
Data firm Kantar has reported that prices across grocers were 12.2% higher than a year ago for the four weeks to September 3, down from the previous month’s 12.7%.
This is the sixth monthly fall in a row, since grocery inflation peaked at a record 17.5% in March.
Fraser McKevitt, head of retail and consumer insight at Kantar, points out that grocery inflation of 12.2% won’t be a number to celebrate for many households.
Our data shows that 95% of consumers are still worried about the impact of rising grocery prices, matched only by their concern about energy bills.
After a full year of double digit grocery inflation, it’s no surprise that just under a quarter of the population consider themselves to be struggling financially – although this is a very slight drop compared to May.
TUC: UK economy is in “the danger zone”
The TUC has issued a sharp warning that the UK economy has fallen into the “danger zone”.
TUC General Secretary Paul Nowak explains:
“Unemployment is up by nearly a quarter of a million over the last year.
“And while average pay has finally inched above inflation, real wages still falling across the public sector, retail, hospitality and construction.
“If pay packets had been growing at pre-crisis levels, workers would be on average £14,700 better off.
“It’s little surprise that families are worried sick about paying their bills and keeping their jobs.
“The government is in denial. The Tories’ lack of a credible economic plan is costing the country dear.”
The number of vacancies across the UK fell by 64,000 in the last quarter, as demand for new workers cooled.
That lowered the number of vacancies in June to August 2023 to 989,000.
Vacancy numbers fell on the quarter for the 14th consecutive period in June to August 2023, and were lower in 13 of the 18 industry sectors, suggesting a fairly widespread retrenching by firms.
The number of vacancies in June to August 2023 was 989,000, down 64,000 on the previous 3 months.
— Office for National Statistics (ONS) (@ONS) September 12, 2023
They were down by 268,000 from a year ago, although they remained 188,000 above their pre #COVID19 levels.
➡️ https://t.co/bhQwfYRkZP pic.twitter.com/qWicMpFbjG
Minister for Employment, Guy Opperman MP, says the government wants to remove barriers stopping people finding work:
“This Government’s record on employment is clear; there are one million fewer workless households than in 2010 and the number of people on company payrolls is a near record high. But we are not complacent about the challenges we face, which is why we remain focused on removing barriers to help people find and succeed in work.
“Our £3.5 billion package to deliver more tailored job support combined with our expanded childcare offer will help unlock individuals’ potential and grow the economy.”
Hunt: Must stick to plan to halve inflation
Chancellor of the Exchequer, Jeremy Hunt has found the positives in today’s jobs report, saying:
“It’s heartening to see the number of employees on payroll is still close to record highs and that our unemployment rate remains below many of our international peers.
“Wage growth remains high, partly reflecting one-off payments to public sector workers, but for real wages to grow sustainably we must stick to our plan to halve inflation.”
The total number of people on company payrolls has dipped over the summer.
Today’s jobs report shows that payroll numbers fell by 1,000 in August, after a 3,500 drop in July.
Payroll numbers had hit record levels since the economy unlocked after the early waves of Covid-19, rising over 30 million, but this trend appears to have now fizzled out.
The number of employees on the payroll fell by 1,000 in August 2023.
— Office for National Statistics (ONS) (@ONS) September 12, 2023
However, it was up by 449,000 on the year and is now 1.12 million above its pre #COVID19 pandemic level.
➡️ https://t.co/CaZNp6LHtK pic.twitter.com/qEb8DIDAlA
IoD: Time for Bank of England to stop raising interest rates
The Institute of Directors are urging the Bank of England to stop raising interest rates, saying earlier increases have hurt the economy.
Kitty Ussher, Chief Economist at the IoD, says today’s jobs data shows a weakening labour market, so the Bank should keep interest rates on hold when it next meets on 21 September.
“Although wage inflation still feels high, the headline rate is now being driven by the recent public sector pay settlements which will not lead to cost pass-through on the part of their employers. Private sector pay wage pressure, although also high, has grown at a lower rate in recent months and is likely to fall further as the labour market loosens and the headline rate of inflation comes down.
“Our own data shows that the large interest rate rise in June led to a worsening in the way that business leaders considered the outlook for the economy. The Bank of England should now give its medicine time to work. The holy grail of a soft landing where we bring inflation down without causing a recession is still possible; the risk now is that too much tightening will unleash a series of negative events that causes the Bank to undershoot its inflation target further down the line.”
The financial markets, though, expect the Bank to raise interest rates again at this month’s meeting, from 5.25% to 5.5%.
Yesterday, Catherine Mann, one of the nine members of the Bank’s rate-setting monetary policy committee, argued it was better to raise interest rates too far rather than take the risk of allowing inflation to become embedded.
Pay rises for public sector workers rose at a record pace last summer, but still lagged behind the private sector.
Today’s labour market report shows that annual average regular pay growth for the public sector was 6.6% in May to July 2023 – the highest since comparable records began in 2001.
But pay across the private sector rose by 8.1%, which is “one of the largest annual growth rates seen outside of the coronavirus (COVID-19) pandemic period”, the ONS says.
IFS: Average earnings will determine rise in state pension next April.
Today’s figure, showing that average earnings grew by 8.5% in the year to May to July, is “particularly important”.
It is very likely to be used in determining how much the state pension increases by next April for the UK’s 12 million pensioners.
So explains Jonathan Cribb, associate director at the Institute for Fiscal Studies.
‘Under the triple lock, the state pension increases every April in line with the highest of average earnings growth in the year from May to July of the previous year, CPI inflation in September of the previous year, and 2.5%. If today’s figure is indeed the highest of those three, it means that a full basic state pension is set to rise from its current £156.20 per week to £169.50, while a full new state pension – which those who reached state pension age since April 2016 can receive – would rise from £203.85 per week to £221.20.
‘Since its introduction in 2010, the triple lock, together with the introduction of the new state pension, has significantly increased the generosity of the state pension relative to earnings. But this comes at a cost to public finances – the triple lock has added £11 billion to spending on the state pension in 2023–24 relative to price or earnings indexation. Compared with the OBR’s forecast from just six months ago, today’s figures mean spending on the state pension is set to increase by another £2 billion in 2024–25.
‘These increasing public finance pressures caused by the triple lock, especially in periods of macroeconomic volatility as we have experienced in recent years, risk the sustainability of the state pension system, meaning heightened uncertainty for individuals planning their retirement finances.’
"Today's figures mean spending on the state pension is set to increase by another £2bn in 2024–25."@JCribbEcon responds to today’s average earnings growth figure, which is very likely to determine how much the state pension increases by next April.https://t.co/AjkS6Fsuzl
— Institute for Fiscal Studies (@TheIFS) September 12, 2023
[There is one proviso – today’s wage data could be revised in a month’s time, and it’s that number which will be used].
The long-term future of the triple lock is unclear, though. On Sunday, Rishi Sunak refused to commit to keeping it in the next Conservative manifesto.
Updated
Here’s the key points from today’s UK labour market report, from ONS Director of Economic Statistics Darren Morgan:
Commenting on today’s labour market figures, ONS Director of Economic Statistics @DarrenM44 said: (1/4)
— Office for National Statistics (ONS) (@ONS) September 12, 2023
⬇️ pic.twitter.com/f0HmlOAXRK
@DarrenM44 continued: (2/4) 💬
— Office for National Statistics (ONS) (@ONS) September 12, 2023
⬇️ pic.twitter.com/vRug7IiCJM
@DarrenM44 added: (3/4)
— Office for National Statistics (ONS) (@ONS) September 12, 2023
⬇️ pic.twitter.com/IO1wSPLK4p
@DarrenM44 concluded: (4/4)
— Office for National Statistics (ONS) (@ONS) September 12, 2023
⬇️ pic.twitter.com/JwfSalYYLC
Introduction: UK jobless rate hits 4.3%, but wage growth beats inflation
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK unemployment has risen, as more people lost their jobs over the summer.
The latest labour market report, just released, shows that UK unemployment rose by 159,000 in the last quarter, taking the jobless total up to 1.464m.
The increase in unemployment was largely driven by people unemployed for up to 12 months.
That lifted the jobless rate to 4.3% in the May-July quarter, up from 4.2% a month ago, and 3.8% in the previous quarter.
Employment fell, due to a drop in full-time self-employed workers, pulling the employment rate down to 75.5% in May to July 2023, 0.5 percentage points lower than February to April 2023.
But there’s better news on pay this morning – total pay, including bonuses, rose by 8.5% per year in the May-July quarter, helped by one-off bonus payments to NHS and Civil Service workers this summer.
That could be significant for millions of pensioners, as this earnings figure is used to set the rise in the state pension the following April.
Regular pay (which excludes bonuses) grew by 7.8%, the same as last month – and the highest since comparable records began in 2001.
In May to July 2023, annual growth in regular pay (excluding bonuses) remained at 7.8%, its highest annual growth rate since comparable records began in 2001.
— Office for National Statistics (ONS) (@ONS) September 12, 2023
➡️ https://t.co/3eHApTBmo4 pic.twitter.com/vrlHsj8Ngn
CPI inflation dropped to 6.8% in July, so this shows that wages are rising faster than prices again, after a long squeeze due to the surge in inflation last year.
The ONS says:
Using CPI real earnings, in May to July 2023, total pay rose by 0.6% on the year and regular pay growth was 0.0% on the year.
Excellent news for households, but it might add to the pressure on the Bank of England to keep raising interest rates to fight inflationary pressures….
Also coming up today
Today is the last day of trading at 24 Wilko stores across the UK, after the retail chain fell into administration.
Stores including those in Aldershot, Cardiff, Falmouth, Liverpool and Stafford are among those shutting today, with a further 28 closing on Thursday.
Yesterday, unions reported that all Wilko’s 400-plus stores are to close with the loss of more than 12,000 jobs, after talks with potential buyers failed to reach a rescue deal.
We’ll find out this morning if grocery inflation eased in the last few weeks, when Kantar releases its latest data on the supermarket sector.
The agenda
7am BST: UK labour market report
8am BST: Kantar releases grocery price inflation report
9am BST: Opec’s monthly oil market report
10.15am BST: UK Treasury committee hold hearing with Sarah Breeden, deputy governor of financial stability at the Bank of England.
Updated
