Closing summary
Our main story today:
The real value of UK workers’ pay continued to fall at the fastest rate for 20 years in June as wage increases were outstripped by soaring inflation amid the cost of living crisis.
The Office for National Statistics said annual growth in average pay, excluding bonuses, strengthened to 4.7% in the three months to June against a backdrop of low unemployment and high job vacancies.
However, the real value of workers’ pay packets dropped by 3% – the fastest decline since comparable records began in 2001 – after taking account of its preferred measure of inflation.
Growth in average earnings including bonuses was 5.1%, although also failed to keep pace with the soaring cost of living.
Tomorrow, we’ll be getting the latest inflation figures for July, which are expected to show a further pick-up to 9.8% from 9.4% in June, a 40-year high. The Bank of England expects it to reach 13.3% in October, the highest since 1980.
Thank you for reading. We’ll be back tomorrow. Take care – JK
The parent company of South Staffs Water and Cambridge Water has confirmed it has been targeted by a cyber attack, but said the incident had not affected its ability to supply water to all its customers.
In a statement published on its website, South Staffordshire said its corporate IT network had been disrupted but that its customer service teams were operating “as usual”.
Consumer price inflation in Canada has eased for the first time in a year, as gasoline prices fell – mirroring a decline in US inflation reported last week.
The consumer price index rose 7.6% in July from a year earlier, according to Ottawa-based Statistics Canada. This compares with an annual rate of 8.1% in June. Prices rose 0.1% month on month, down from June’s 0.7% monthly increase.
However, despite signs that inflation may have peaked, the Bank of Canada is still expected to deliver a 75 basis point rate hike on 7 September.
Rail strikes latest: only 20% of services to run
Network Rail has confirmed that strike action means only around 20% of Britain’s train services will operate on Thursday and Saturday, with just half of lines open.
There will be around 200 more services each day compared with previous walkouts by members of the Rail, Maritime and Transport union (RMT) as the school summer holiday has ended in Scotland, meaning more contingency staff are available.
The days after the strikes will also be affected, with service levels reaching 70% on Friday and 85% on Sunday.
Andrew Haines, Network Rail chief executive, said:
It saddens me that we are again having to ask passengers to stay away from the railway for two days this week due to unnecessary strike action, when we should be helping them enjoy their summers.
We have made a good and fair offer but, with the exception of our TSSA management grades who accepted the deal, our unions are refusing to let our employees have a say, and sadly that means more disruption on the rail network.
UK sees biggest rise in overseas workers since early 2020
Returning to our main story on the UK job market today:
Britain recorded its biggest rise in foreign workers since the start of the Covid pandemic in the year to June, driven almost entirely by people from outside the EU, today’s official labour market figures showed.
Since January 2021, most EU citizens who want to move here to work must be sponsored by an employer and be paid a salary that doesn’t significantly undercut existing wages. The post-Brexit change put EU workers on the same footing as those from the rest of the world, but has been criticised by employers who say the process is bureaucratic and a non-starter for most jobs that pay less than £25,600 a year.
The number of foreign-born workers in the UK rose by 223,000 in the year to the end of June, up from an increase of 184,000 in the year to March and the biggest rise since early 2020, according to the Office for National Statistics. Non-EU workers increased by 189,000 while the number of EU-born workers went up by 34,000 over the past year and totals just under 2.4 million.
The number of non-EU people employed in Britain has increased to 3.9 million from 3.1 million since the Brexit referendum in June 2016.
The consumer group Which? has warned that the £533 jump in annual grocery bills predicted by the data firm Kantar will “put a huge dent in already-stretched household finances”.
Sue Davies, Which? head of food and consumer protection policy, said:
Even before the latest increases, Which? found the cost of hundreds of popular items had soared by more than 20% in two years. People are responding in a range of ways, including in the most desperate cases having to miss meals, or resorting to food banks.
Budget ranges are becoming increasingly vital amid the worsening cost of living crisis, but our investigations have suggested that own-brand budget labels have become less available just as consumers need them most.
The government must support those who are struggling – but supermarkets can also boost budget range availability across stores so people do not have to pay excessive prices for everyday essentials. They should be more upfront about costs and provide clear unit pricing to help shoppers to easily compare items.
European shares are rallying for a fifth day, as mining and defensive stocks climb, but analysts reckon sentiment could soon turn negative.
In London, the commodities trader Glencore, British Gas parent Centrica and miners Anglo American, Rio Tinto and Antofagasta are leading the gains after stellar results from the London-listed global mining group BHP Group. The FTSE 100 index is 0.7% ahead while Germany’s Dax has risen by 0.6% and France’s CAC is up 0.4%.
Seema Shah, chief strategist at Principal Global Investors, told Reuters:
A lot of this [rally] is running on technicals and momentum, but the fundamentals haven’t changed.
The economic outlook for Europe is very negative. As we start to see recession come through and some of the hard economic data begins to deteriorate, that’s when you could see European equities deteriorate.
Updated
Insolvencies rise in England and Wales
The latest insolvency figures show a worsening situation for companies in England and Wales, with a growing number of firms opting to be liquidated.
The number of registered company insolvencies in July was 1,827, according to the Insolvency Service:
67% higher than in the same month in the previous year (1,096 in July 2021), and
27% higher than the number registered three years previously (pre-pandemic; 1,440 in July 2019).
There were 1,609 Creditors’ Voluntary Liquidations (CVLs), 60% higher than in July 2021 and also 60% higher than July 2019. Rising energy bills and staff shortages have driven some companies out of business, as we reported earlier this month.
Numbers for other types of company insolvencies, such as compulsory liquidations, remained lower than before the coronavirus pandemic, although there were three times as many compulsory liquidations as in July 2021, and the number of administrations was twice as high as a year ago.
Jeremy Whiteson, partner in Fladgate’s restructuring and insolvency practice, said:
Of particular concern is the increase in figures from recent months. The July 2022 figures are a 7.5% increase on the June 2022 figures. While that may not look like a big increase, it goes against the recent trend of declining numbers of insolvencies month on month. That is also in the summer period when activity could be expected to be limited- resulting in low insolvency figures.
It would be unsurprising if the situation was worsening for businesses and this was not merely a one month blip. High fuel prices, inflation, labour shortages, post Brexit difficulties with international shipping, uncertainty in capital markets, raising interest rates and geo-political uncertainty all pose difficulties for businesses.
The increase in overall figures was largely caused by an increase in creditors voluntary liquidations (CVLs). This is a procedure generally used for companies with no ongoing business to dispose of remaining assets, distribute available funds to creditors and dispose of the corporate entity.
Updated
CMA closes case against Barratt over mis-selling of leasehold homes
Britain’s competition regulator has closed the case against Barratt, the country’s largest housebuilder, related to alleged mis-selling of leasehold homes.
The Competition and Markets Authority (CMA) had launched an investigation into four of the country’s biggest housebuilders – Barratt, Persimmon, Taylor Wimpey and Countryside – in September 2020 over potential mis-selling of leasehold homes and high ground rents.
The CMA concluded that it was insufficient to support a clear legal case for the CMA to secure collective redress for Barratt leaseholders under its consumer law powers.
The watchdog also said it was “positively engaging” with firms that purchased freeholds from Taylor Wimpey to secure formal commitments from them over removing conditions pertaining to doubling of rents.
Taylor Wimpey, Britain’s third-biggest homebuilder, last year said it would drop costly contract terms that lock leaseholders into rents that double every 10 years.
News round-up
And here’s a round-up of the other main news.
Supermarket bills in Great Britain will soar by £533, or more than £10 a week, as grocery price inflation hits its highest level since at least 2008.
The price of a weekly shop rose 11.6% in the four weeks to 7 August, compared with a year before, according to the latest figures from Kantar. That represents the highest rate of inflation since the market research group began tracking the sector 14 years ago.
Two of the UK’s biggest energy suppliers have thrown their weight behind a plan being debated in the industry to devise a fund that could freeze customer bills for two years.
The British Gas owner Centrica and Octopus Energy are understood to support a scheme that would create a multibillion-pound facility to spread the cost of an emergency funding package over a decade, the Guardian can reveal.
Ryanair is to add more than 500 flights to its London Stansted schedule to keep pace with demand during the October half-term holiday.
Michael O’Leary, chief executive of the low-cost airline, said extra capacity at the Essex airport would mean capacity for another 100,000 passengers at a time when “hopeless” Heathrow suffers further travel chaos.
Ted Baker has agreed a cut-price £211m takeover by the US group that owns Reebok and a stake in David Beckham’s clothing and merchandise empire.
The board of the retailer, which has more than 500 shops and concessions around the world, has recommended shareholders approve the buyout by Authentic Brands Group (ABG).
Adam Neumann, the ousted founder of WeWork, is back with a $1bn (£830m) property venture after saying he learned “plenty” of lessons from the spectacular implosion of the shared office space rental company.
Andreessen Horowitz, a Silicon Valley venture capital firm that was an early backer of Airbnb, Facebook and Skype, announced in a blogpost that it had invested $350m in Flow, a “community-driven” rental startup founded by Neumann.
Here’s our analysis of today’s UK job market figures.
There are two ways of looking at the state of Britain’s labour market. In one it is a case of the glass being half full, in the other half empty, writes our economics editor Larry Elliott.
If you are a government minister you take the former view. Nadhim Zahawi said the unemployment rate of 3.8% has rarely been lower in decades and the chancellor is right about that.
What’s more, the economy continued to create net new jobs in the three months to June, with employment rising by 160,000 over the quarter. Flash estimates suggest the pattern continued into July.
With job vacancies at near-record levels, the labour market looks in good shape to withstand the recession the Bank of England is forecasting for the UK. The economy contracted slightly in the three months to June, but demand for workers remained strong…
A glass half empty observer sees things differently, and would point to the slower pace of employment growth, evidence that job vacancies are past their peak and the record gap between regular pay (unadjusted for bonuses) and the rate of inflation.
Samuel Tombs, the chief UK economist at Pantheon Macro, says demand for labour is stabilising just as the supply of workers is picking up. The increase in the size of the workforce is being driven by immigration, he notes, with the number of non-UK nationals either working or looking for a job rising by almost 250,000 in the past year.
The domestic labour force is also likely to increase as people try to maintain their living standards at a time when cost of living pressures are intensifying, and this will lead to higher unemployment as a weakening economy leads to fewer job opportunities.
German economic sentiment weakens towards record low
Economic sentiment in Germany, Europe’s economic powerhouse, has weakened further and is now close to its all-time low hit during the financial crisis.
The economic sentiment index from ZEW (Leibniz Centre for European Economic Research in Mannheim) fell to -53.3 in August from -53.8 in July. The current assessment index weakened to -47.6, from -45.8, the lowest level since April 2021.
Michael Schröder, researcher at ZEW and head of the ZEW financial market survey, said:
The ZEW economic expectations decrease again slightly in August after a sharp drop in the previous month. The financial market experts therefore expect a further decline in the already weak economic growth in Germany.
The still high inflation rates and the expected additional costs for heating and energy lead to a decrease in profit expectations for the private consumption sector. In contrast, the expectations for the financial sector are improving due to the supposed further increase in short-term interest rates.
August’s ZEW reading only adds to the bad news out of Germany, said Carsten Brzeski, gobal head of macro at ING.
The long list of risks and challenges the German economy is facing makes a recession in the second half of the year almost inevitable. It’s not the most reliable leading indicator but the most timely one.
The reasons for yet another disappointing data release out of Germany are clear: the almost never-ending long series of risks and challenges for the German economy has become even longer in recent weeks, with two recent additions: low water levels and a gas levy.
He said the survey reflects financial analysts’ views, which don’t always reflect business or consumer confidence. What the ZEW index has signalled better than other indicators in the past, however, are turning points. With this in mind, today’s ZEW reading does simply not bode well.
More generally speaking, the German economy is quickly approaching a perfect storm. The war in Ukraine has probably marked the end of Germany’s very successful economic business model: importing cheap (Russian) energy and input goods, while exporting high-quality products to the world, benefitting from globalisation.
The country is now in the middle of a complete overhaul, accelerating the green transition, restructuring supply chains, and preparing for a less globalised world. And these things come on top of well-known long-standing issues, such as a lack of digitalisation, ageing infrastructure, and an ageing society, to mention a few.
In the coming weeks and months, these longer-term changes will be overshadowed by shorter-term problems: high inflation, possible energy supply disruptions, and ongoing supply chain frictions. In recent days, these shorter-term problems have become larger as low water levels and the new gas levy have added to inflation and recession concerns.
Yesterday, the German government announced a gas levy for households and businesses, which will come into effect in October. This surcharge was set at 2.4 euro cents per kilowatt hour. Current gas prices are around 17 cents.
FYI, the #ZEW survey index of financial market sentiment towards the German economy fell another 1.5 points in August (to -55.3), slipping further into #recession territory
— Julian Jessop 🇬🇧 🇺🇦 (@julianHjessop) August 16, 2022
ps. similar picture for #euro area as a whole (down 3.8 points, to -54.9)https://t.co/coE4vJbXBy pic.twitter.com/J1o1MD60UD
Ryanair to add 500 flights at Stansted for October half term
Ryanair said it will add more than 500 flights at London Stansted during the October half-term school holiday, after Heathrow extended its cap on passenger numbers.
The Dublin-based airline said the extra flights at the Essex airport will have capacity for 100,000 passengers, and its chief executive Michael O’Leary had a pop at “hopeless Heathrow”.
Heathrow announced on Monday that the limit of 100,000 departing passengers per day it introduced in July due to staff shortages will continue until the end of October. This will disrupt the holiday plans of many families who are hoping to get away for half-term.
O’Leary said prices for the new Ryanair flights start from €29.99 or £25.29.
While hopeless Heathrow continues to cut flights and raise fares for families, Ryanair and London Stansted continue to add flights, and offer thousands of low-fare seats for the autumn mid-term break.
Ryanair insisted that it and Stansted have “more than sufficient staff to handle these additional flights”. Heathrow has repeatedly criticised airlines for a shortage of ground handlers at the airport, which has resulted in thousands of items of baggage not being put on to flights this summer.
In response to the extension of the cap, a Virgin Atlantic spokeswoman said:
We are disappointed that Heathrow Airport has already decided to extend the passenger capacity cap until the end of October, as additional resources come on line every week and the airport experience improves.
Airline customers have a right to expect their bookings will be honoured and we’re doing everything in our power to minimise disruption, getting our customers to where they need to be smoothly. We urge Heathrow to provide a comprehensive plan for returning to normal operations as soon as possible.
Updated
Gas prices mixed on higher demand, storage filling
On the markets, British gas prices have gone up on rising demand while Dutch wholesale gas prices were mixed.
UK gas for immediate delivery rose by 15.25p, or 4.25%, to 374 per therm while the contract for next-day delivery added 10p to 385p, a 2.7% gain.
Dutch gas for September delivery rose 1.5% to €231.85 per megawatt hour, while the October contract dipped 0.1% to €230. Analysts at ING said prices are coming off after hitting the highest levels since early March on Monday.
However, European gas storage continues to edge higher, reaching almost 75%, which is in line with the five-year average and well above the 62% seen at this stage last year.
Assuming there are no further reductions in Russian gas flows, the EU should hit its target of having gas storage 80% full by 1 November, ING said.
Professor Len Shackleton, labour market expert at the free market think tank, the Institute of Economic Affairs, said:
The latest labour market figures are a mixed bag. The main indicators such as payroll employment (which was a record high again in July), unemployment (only very marginally up), inactivity (unchanged), vacancies (still very high) and redundancies (falling and below pre-pandemic levels) all continue to paint an acceptable picture.
Productivity has increased slightly in the latest data and there has even been a welcome small increase in self-employment, which crashed during and immediately after lockdown.
The headline problem, however, is that median pay increases have failed to keep pace with accelerating inflation, he said.
Caution always needs to be applied to published pay figures of this kind, which are statistical constructions and don’t relate to the experience of any actual individuals. For example, there appears to have been an increase in the employment of young people, much of it in food and accommodation. As these workers are paid relatively poorly, an increase in their numbers relative to more highly-paid workers who are retiring or otherwise leaving the workforce can drag down median pay. Moreover, annual pay increases are measured relative to a previous period when the exit from lockdown may have distorted the data.
Some groups of workers, notably in finance and insurance, experienced much higher pay increases than the norm, while others, such as those in arts and entertainment, fared much worse.
Nevertheless the overall picture on pay is concerning, particularly as the big anticipated increases in energy prices are yet to work through. While a summer of strikes may push up pay of some highly organised workers, particularly in the public sector, this will do nothing for the vast majority of private sector workers who will be dependent on the state of demand for their particular services.
The vast majority, however, will on the evidence of today’s figure at least keep their jobs for the time being. The hope must be that an imminent downturn in the economy will be a relatively job-rich recession unlike the recessions of the past.
Myron Jobson, senior personal finance analyst, at interactive investor, flagged the widening gap between public sector and private sector pay.
The latest figures further indicate a stark divide in the economy, with pay packets in the UK private sector growing more than three times as fast as public sector workers’ renumeration over the period (5.9% versus 1.8%). This disparity could result from employers in the private sector offering more lucrative golden hellos and stronger bonuses than those offered in the public sector to attract and retain talent in one of the most competitive job market in generations.
Many companies are increasingly struggling to keep their prices low when the cost of labour is on the up. High inflation means the buying power of workers’ take-home pay has been shrinking. For many workers, their pay packet is not stretching wide enough to meet the escalating cost of seemingly everything from food, energy and petrol. If you exclude bonuses, pay in real terms is falling at its fastest rate since records began in 2001, down 3% - although the figures are distorted by employees on furlough over the same period last year.
What we learned from today's labour market data
To sum up, companies in the UK have become more cautious about hiring and workers suffered a record drop in their basic wages when adjusted for soaring inflation.
Wage growth is far stronger than the Bank of England would like: up 5.1% with bonuses included and 4.7% excluding bonuses in the quarter to June (this compares to 6.4% and 4.4% respectively in the previous three months).
However, regular real wages, adjusted for inflation, fell 3%, the biggest drop in at least 20 years. Also, pay packets in the private sector are growing more than three times as fast as public sector staff wages.
The number of job vacancies dropped for the first time since the summer of 2020, suggesting hiring demand is slowing.
The UKs unemployment rate ticked up to 3.8%, close to a half-century low, but is expected to rise in coming months as the economy falls into recession. The number of people in employment grew by 160,00 between April and June, far less than the 256,000 increase forecast by economists.
Analysts have highlighted an influx in overseas workers following declines earlier in the pandemic. This is almost entirely non-EU workers, while the number of EU nationals working in the UK is down more than 6% compared to the 2019 average, following Brexit.
The Bank of England is watching the labour market closely for signs of long-term inflationary pressures and many economists are expecting another half-point rate hike in September.
Figures due to be published tomorrow are expected to show a further rise in UK inflation to an annual rate of 9.8% in July from 9.4% in June, a 40-year high. The central bank expects it to reach 13.3% in October, the highest since 1980.
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Stephen Evans, chief executive of Learning and Work Institute, said:
The pain from the cost of living crisis is deepening with real regular wages continuing to drop at their fastest rate on records dating back to the start of the century, driven by rising inflation. Things will get tougher for households with the sharpest rises in the energy price cap still to come, perhaps to over £4,000 per year. The urgency for further emergency support from the Government grows.
The UK also faces a recruitment crunch with employers struggling to fill all their roles, despite 1.9 million people either starting work or changing jobs in the last quarter. This is driven by higher numbers of over 50s and people who are long-term sick leaving the labour market.
To tackle these twin challenges we need immediate help and a plan for growth, including better employment support for people who’ve left the labour market. Otherwise, hardship will grow and our economy will be smaller than it needs to be.
Ruth Gregory, senior UK economist at Capital Economics, said:
Despite economic growth contracting in the second quarter, with workers having been hard to find, we suspect firms will be cautious about shedding workers in the coming quarters for fear of not being able to re-hire them when demand recovers.
With wage growth running well above the rates of 3.0-3.5% that are consistent with the 2% inflation target, it supports our view that the Bank of England will raise interest rates from 1.75% now to 3.00%, despite the economy being in recession.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, also highlighted the rise in immigration, as well as flagging future rises in the UK unemployment rate:
The unemployment rate no longer is falling and the timeliest indicators suggest that it will start to rise far sooner than the Bank of England anticipates.
Labour demand is stabilising just as labour supply is picking up.
The rebound in the workforce has been driven by an increase in immigration, now that Covid no longer is influencing migration decisions and more UK businesses now have sponsor licences which mean they can lawfully employ non-U.K. nationals. Indeed, the number of non-UK nationals either working or looking for a job in the U.K. increased by 248,000, or 6.3%, year-over-year in Q2.
This year’s combination of increasing UK wages but stable minimum salary thresholds for UK visas suggests that immigration will continue to pick up. Meanwhile, we think domestic labour supply will continue to pick up, as it has done during prior real wage squeezes, as households attempt to preserve their standard of living. Accordingly, we think that the unemployment rate will start to rise soon, rising to about 4.2% by the end of this year.
Updated
Returning to the UK labour market data, James Smith, developed markets economist at ING said:
There are three key takeaways from the latest UK jobs numbers. Firstly, hiring demand is clearly falling, and that’s most evident from a decline in unfilled job vacancies – a trend that’s likely to continue, according to more up-to-date online vacancy numbers. That’s not to say firms are letting staff go – redundancy levels haven’t budged from their lows over recent weeks and unemployment doesn’t appear to be rising, even if the jobs market has stopped tightening.
The second thing that stands out is that the number of people inactive – neither employed nor actively seeking a job – increased abruptly again last month. The vast majority of the increase in inactivity we’ve seen since the pandemic began (and indeed in recent months) is linked to long-term sickness. There are now more than 300,000 extra people that fall into this category compared to pre-pandemic, and the challenges in the NHS suggest this story unfortunately isn’t going to improve very quickly.
The final takeaway is that the number of foreign nationals working in the UK jobs market has increased noticeably this year, having fallen earlier in the pandemic, though this is almost solely driven by non-EU workers. The number of EU nationals working in the UK is down more than 6% compared to the 2019 average.
All of this presents a complicated picture for the Bank of England. Hiring demand is fading, but at the same time the skill shortages and labour supply issues that have plagued the jobs market for several months now are showing only limited signs of improvement. Inactivity remains high, even if migration – a key source of worker shortages through the pandemic – is showing some signs of bouncing back.
Updated
UK grocery price inflation hits 11.6%, highest since 2008
Separate figures from the data company Kantar show that grocery price inflation in the UK has hit its highest level since 2008, reaching 11.6% over the past four weeks. Butter, milk, chicken and dog food have seen the biggest price rises.
The average household’s annual grocery bill is now set to soar by £533 to £5,128, the equivalent to £10.25 every week.
Faced with soaring inflation, people are increasingly turning to own-label value products which tend to be cheaper, with sales increasing by 19.7% this month.
The figures also showed that supermarket sales rose by 2.2% in the 12 weeks to 7 August, the fastest growth the industry has seen since April 2021. The long spell of hot weather has led to a of 23% jump in mineral water sales and an 18% rise in ice cream sales. People have also been shopping for summer holidays, with sales of clothes such as shorts, sundresses, caps and swimming costumes up by 163%.
Fraser McKevitt, head of retail and consumer insight at Kantar, said:
As predicted, we’ve now hit a new peak in grocery price inflation, with products like butter, milk and poultry in particular seeing some of the biggest jumps. This rise means that the average annual shop is set to increase by a staggering £533, or £10.25 every week, if consumers buy the same products as they did last year.
It’s not surprising that we’re seeing shoppers make lifestyle changes to deal with the extra demands on their household budgets. Own-label ranges are at record levels of popularity, with sales rising by 7.3% and holding 51.6% of the market compared with branded products, the biggest share we’ve ever recorded.
The German discount chain Lidl remains the fastest growing grocer, with sales up by 17.9% over the latest 12 weeks, raising its market share to 7%. Boosted by the popularity of its dairy goods and bakery lines, this is its highest rate of growth since September 2017. Aldi also performed strongly, and its market share increased by 0.9 percentage points to 9.1%. Together Lidl and Aldi have gained 1.8% of British grocery sales over this period, representing a £2.3bn annual shift in spending towards the discounters.
McKevitt said supermarkets are running fewer promotions than in the past.
People are shopping around between the retailers to find the best value products, but back in 2008 there was much more of a reliance on promotions. It’s harder to hunt out these deals in 2022 – the number of products sold on promotion is at 24.7% for the four weeks to 7 August 2022, while 14 years ago it was at 30%. Instead, supermarkets are currently pointing shoppers towards their everyday low prices, value-ranges and price matches instead.
Over the past month we’ve really seen retailers expand and advertise their own value ranges across the store to reflect demand. Consumers are welcoming the different choices and options being made available to them on the shelves, with sales of own-label value products increasing by 19.7% this month. As an example, Asda’s Just Essentials line, which launched this summer, is already in 33% of its customers’ baskets.
Updated
Here’s our full story on the labour market stats:
Meanwhile, about 16,000 workers at British Airways are to receive a pay rise worth as much as 13%, reversing cuts imposed during the Covid pandemic.
Union leaders said last night the deal arose after the threat of strike action earlier this summer by check-in staff, which resulted in a pay agreement that was being extended across the workforce.
It is understood that the deal will apply to about 16,000 non-management workers across the company, including cabin crew, engineers and baggage handlers, helping to restore pay to 2019 levels after the airline cut staff wages when the pandemic grounded flights around the world.
The ONS said the number of people in full-time employment has gone up. The number of part-time workers had been increasing since the start of 2021, recovering from the large falls in the early stages of the Covid pandemic, but fell between April and June. The number of self-employed people fell in the first year of the pandemic and has remained low, although the number ticked up during the latest three-month period.
Some economists say that the chances of another half-point interest rate hike from the Bank of England in September have gone up following the jump in nominal wage growth, i.e. stripping out the effect of inflation.
Thomas Pugh, economist at audit, tax and consulting firm RSM UK, said:
The leap in regular pay growth to 4.7% in June, which is miles above the 3%-3.5% that’s consistent with the 2% inflation target, significantly raises the chances that the Monetary Policy Committee (MPC) will go for a second 50 basis point rise in interest rates in September.
Admittedly, total wage growth fell from 6.4% year-on-year in the three months to May to 5.1% y/y in June as bonus payments growth dropped to 10.4%. But bonus payments have been volatile lately and the MPC prefers to look at underlying pay growth, which rose strongly. Indeed, pay growth rose rapidly in every industry except for the public sector.
Add in employment growth of 160,000 and it paints a picture of a very tight labour market. Combine this with soaring inflation, which is likely to have reached almost 10% in July, and we think a 50bps hike next month is now more likely than not.
There is evidence that the labour market has begun to cool, he noted.
The number of job vacancies dropped by 19,800 in July, the first quarterly fall since June to August 2020. Indeed, much softer economic growth in the second half of the year, due to the cost-of-living crisis, will dampen demand for labour and ease some of the tightness in the labour market. However, we think the smaller pool of available workers will keep the labour market tight for at least the next couple of years.
The tightness in the labour market was reflected in strong nominal pay growth. However, real total pay growth, which takes inflation into account, fell by 2.5%, suggesting that the cost-of-living crisis took a bigger toll in June. Real wages are likely to fall by around 3% in 2022, which would be the deepest squeeze on spending power on record.
Ben Harrison, director of the Work Foundation at Lancaster University, a think tank for improving work in the UK, said:
Ahead of next week’s energy price cap announcement, there is more bad news for workers as real wages fell by a record 3% on the year. With inflation at 9.4%, and the Bank of England predicting it will peak at 13% in early 2024, people across the UK are facing more tough decisions as their regular pay fails to keep pace with rising prices.
The six million workers in severely insecure jobs will be hardest hit and are already running out of options. Many have already tried to find more hours work and cutback spending but continue to face great uncertainty.
With fuel bills about to soar again, hardworking families cannot wait any longer. The prime minister must return from holiday and agree a comprehensive package of support with the two Conservative leadership candidates.
The Liberal Democrat Treasury spokesperson Sarah Olney called on the government to freeze energy bills this winter (the average annual household bill is forecast to rise above £4,200 in January).
Families are being hammered by a cost of living catastrophe and yet the government is nowhere to be found.
This Zombie government has no plan and is failing our country. People can’t wait any longer for the Conservatives to play out their horror show leadership contest.
Liberal Democrats are calling for energy bills to be frozen this winter and for Parliament to be recalled to put these plans into law.
Updated
Labour was quick to respond. Jonathan Ashworth, shadow work and pensions secretary, said:
Today we see yet another record fall in real wages, and further proof that the Tories have lost control of the economy.
Because of the Tories’ failure on the economy, families face plummeting real wages and soaring energy bills. Yet, this Zombie government is offering no solutions to the cost of living crisis.
Labour will help build a secure economy and we will freeze energy bills so that people don’t pay a penny more this winter.
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Introduction: UK real pay falls by record 3%, as job vacancies also decline – business live
Good morning, and welcome to our live, rolling coverage of business, economics and financial markets.
The number of job vacancies in the UK has fallen for the first time in two years, while ‘real’ pay – adjusted for inflation – fell by a record 3% in the quarter to June as the cost of living crisis deepened.
Figures from the Office for National Statistics showed average total pay, including bonuses, grew by 5.1% between April and June while regular pay excluding bonuses grew by 4.7%.
However, when adjusted for inflation (which reached a 40-year high of 9.4% in June), total pay fell 2.5% and regular pay fell by 3%, the fastest decline since comparable records began in 2001.
The unemployment rate in the quarter rose by 0.1 percentage points to 3.8%, still close to the lowest levels since the 1970s.
But in a sign that hiring demand is starting to slow, the number of job vacancies fell by 19,800 to 1.274m, the first quarterly decline since the June to August period in 2020. Since vacancies fell to an all-time low in April to June 2020, they have increased by 945,000 in a little over two years, the ONS said.
Employment rose 73,000 in July to a record 29.7 million people, while the employment rate for people aged 16 to 64 dipped by 0.1 percentage points to 75.5% in the quarter to June.
The economic inactivity rate was unchanged on the quarter at 21.4%. The increase in economic inactivity – people who are neither employed nor actively seeking a job – since the start of the coronavirus pandemic had been largely driven by those who were students and the long-term sick, the ONS said. In the latest three-month period, there was an increase in the number of people who were economically inactive owing to long-term sickness, which was largely offset by a decrease in those economically inactive for “other” reasons.
Headline indicators for the UK labour market for April to June 2022 show that
— Office for National Statistics (ONS) (@ONS) August 16, 2022
▪️ employment was 75.5%
▪️ unemployment was 3.8%
▪️ economic inactivity was 21.4%
➡️ https://t.co/NCz8Ddywix pic.twitter.com/3F3O5XhFnh
The chancellor of the exchequer, Nadhim Zahawi said:
Today’s stats demonstrate that the jobs market is in a strong position, with unemployment lower than at almost any point in the past 40 years – good news in what I know are difficult times for people. This highlights the resilience of the UK economy and the fantastic businesses who are creating new jobs across the country.
Although there are no easy solutions to the cost of living pressures people are facing, we are providing help where we can. We are delivering a £37bn package of help for households through cash grants and tax cuts so people can keep more of what they earn.
And whilst we cannot completely shield everyone from these global economic shocks, we are targeting this support on millions of the most vulnerable people in our society: those on the lowest incomes, pensioners and disabled people.
Commenting on today’s labour market data, ONS director of economic statistics, Darren Morgan said: (1/4)
— Office for National Statistics (ONS) (@ONS) August 16, 2022
⬇️ pic.twitter.com/z4oj2kcIRq
The ONS director of economic statistics, Darren Morgan, added:
Meanwhile, the total number of hours worked each week appears to have stabilised very slightly below pre-pandemic levels.
Crude oil prices are down again this morning after falling as much as 5% on Monday, as bleak economic data from China, the world’s biggest crude buyer, revived fears of a global recession.
Brent crude has lost 1% to $94.15 a barrel while West Texas Intermediate, the North American benchmark, dipped 0.76% to $88.73.
China’s central bank cut lending rates in a surprise move on Monday to revive demand after the economy slowed unexpectedly in July, with factory output and retail sales squeezed by Beijing’s strict zero-Covid policy.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said the Saudi state oil company
Aramco said on Sunday that they could raise their output to the maximum capacity of 12m barrels per day, if the Saudi government orders to.
And the growing prospect of Iranian oil is playing in favour of the downside, as the latest news revealed that Iran responded to the EU’s proposal for reviving the 2015 nuclear deal between the US and Iran, and European politicians now push the US to adopt a’ realistic approach and flexibility’ to resolve the couple of remaining issues. A nuclear deal between the US and Iran should unlock up to 4m barrels of Iranian oil per day and help easing the supply crisis.
The Agenda
10am BST: Eurozone and Germany ZEW economic sentiment survey for August
1.30pm BST: Canada inflation for July (forecast: 7.6%)
2.15pm BST: US Industrial production for July
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