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UK real wages rise, but number of EU workers in Britain drops – business live UK real wages rise, but drop in EU workers could hurt NHS – business live
(about 1 hour later)
The retail sales figures have lifted expectations of a series of US rate rises this year, and helped push the dollar higher. Sterling has slipped to a new low for the year of $1.3457, down 0.7%.
A US spending boom could be getting underway, says Nordsea’s chief analyst:
🇺🇸 U.S. consumers are going shopping with their tax savings Apr retail sales data suggest the spending boom is starting to materialize after a winter of sluggish spending pic.twitter.com/AFphvl6Yk3
US retail sales edged up in April with signs of wage growth and the recent tax cuts helping to offset some of the pressure on consumer spending from higher petrol prices.
Sales grew by 0.3% last month, in line with expectations, but the March figure was revised up to show a 0.8% surge compared to the initial estimate of a 0.6% rise.
Core retail sales, excluding cars, petrol, building materials and food services, climbed by 0.4% in April. Year on year, sales rose 4.7%.
Economist James Knightley at ING Bank said:
US retail sales have been heavily distorted over the past 6-9 month, but we are finally getting some “cleaner” data that suggests households are in good spirits and are spending in the new season.
US retail sales rose 0.3%MoM in April, which was in line with expectations, but there were some nice upward revisions to March’s data from 0.6% growth to 0.8% growth. Importantly, the “control” group, which excludes very volatile items such as food, autos, building materials and gasoline and supposedly better matches consumer spending within GDP, was up 0.4% after a 0.5% gain in March. February was revised up a tenth of a percentage point too.
Retail sales have been difficult to interpret for much of the past year. In particular, Hurricanes Harvey and Irma caused extensive damage that triggered a wave of spending as households replaced lost items in Sep-Nov 2017. In fact retail sales soared a cumulative 3.5% during the period only to fall back in Dec, Jan and Feb (although Feb has now been revised up to being flat).
Now that these distortions are out the way we expect upcoming data to show households continuing to spend strongly. Employment is rising, wages are growing and tax cuts means there is more cash in people’s pockets. With consumer confidence at strong levels, consumer spending growth is a key factor behind our above consensus 3% GDP growth forecast for the US this year. In turn, this leads us to look for a further three Federal Reserve rate rises in 2018.
Over in the financial markets, the oil price has hit a new three and a half-year high.
Brent crude is changing hands at $79.30 per barrel, the highest since late 2014.
Prices have been rising since America pulled out of the Iran nuclear deal last week - a move likely to take some Iranian oil production off the market.
Crude prices have jumped by 75% since June 2017, which has led to higher transport costs and petrol price at the pumps. That in turn pushed up inflation, and is one reason why real wages in the UK had been shrinking (although not any more)
The drop in the number of EU workers in Britain could also be a warning sign for UK firms.
The UK labour market certainly looks tight, with inactivity and employment both at record highs - and employers facing 806,000 vacancies in the last quarter.
Gerwyn Davies of CIPD, the professional body for HR and people development, says bosses may find it harder to recruit staff:
“Employers need to be better prepared for a changing and tighter labour market. Labour supply looks set to fall further in the coming months, partly due to an abrupt plateauing in the number of EU citizens in employment in the UK, as this morning’s figures show.
Greater investment in skills is needed to offset recruitment difficulties and increase productivity growth alongside more workforce planning activity.”
Britain’s hospitals and social services could be hurt by the 28,000 decline in EU workers in Britain over the last 12 months.Britain’s hospitals and social services could be hurt by the 28,000 decline in EU workers in Britain over the last 12 months.
So warns Dr Heather Rolfe of The National Institute Of Economic and Social Research.So warns Dr Heather Rolfe of The National Institute Of Economic and Social Research.
She explains:She explains:
This represents a reduction in arrivals and increase in departures of EU citizens, which employers explain by uncertain futures and hostility. The reverse trend is shown by non-EU nationals in employment who increased in number by 20,000. This may be explained in part by employers making more use of the visa system when faced with skills shortages....This represents a reduction in arrivals and increase in departures of EU citizens, which employers explain by uncertain futures and hostility. The reverse trend is shown by non-EU nationals in employment who increased in number by 20,000. This may be explained in part by employers making more use of the visa system when faced with skills shortages....
“These trends, in particular the fall in EU nationals working in the UK, are likely to affect the UK’s economic performance and also services, with the NHS and social care under particular pressure”.“These trends, in particular the fall in EU nationals working in the UK, are likely to affect the UK’s economic performance and also services, with the NHS and social care under particular pressure”.
According to FullFact, EU immigrants make up about 5% of English NHS staff, and 10% of all doctors.According to FullFact, EU immigrants make up about 5% of English NHS staff, and 10% of all doctors.
The Resolution Foundation have sent over some useful charts, showing the state of the labour market:The Resolution Foundation have sent over some useful charts, showing the state of the labour market:
Stephen Clarke, Senior Economic Analyst at the Resolution Foundation, sums up the picture:Stephen Clarke, Senior Economic Analyst at the Resolution Foundation, sums up the picture:
“Britain started 2018 as it has spent much of the last decade, with more impressive jobs growth but little prospect of recovering from its disastrous record on pay.“Britain started 2018 as it has spent much of the last decade, with more impressive jobs growth but little prospect of recovering from its disastrous record on pay.
“Employment has hit a record high, driven by male employment breaking the 80 per cent barrier for the first time in nearly three decades.“Employment has hit a record high, driven by male employment breaking the 80 per cent barrier for the first time in nearly three decades.
“While the return to pay growth is very welcome it remains anemic and wages are still over £700 a year lower than they were a decade ago. The stark fall in productivity in recent months suggests that a strong pay recovery remain some way off.”“While the return to pay growth is very welcome it remains anemic and wages are still over £700 a year lower than they were a decade ago. The stark fall in productivity in recent months suggests that a strong pay recovery remain some way off.”
Britain’s finance minister has welcomed the news that wages are outpacing inflation.Britain’s finance minister has welcomed the news that wages are outpacing inflation.
Chancellor of the Exchequer, Philip Hammond said:Chancellor of the Exchequer, Philip Hammond said:
“Growth in real wages means that people are starting to feel the benefit of more money in their pockets; another turning point as we build a stronger, fairer economy.“Growth in real wages means that people are starting to feel the benefit of more money in their pockets; another turning point as we build a stronger, fairer economy.
“We can be proud of our record on jobs. The unemployment rate is at its lowest in over 40 years and with our National Living Wage we are making sure that the lowest-paid feel the benefit with an extra £2,000 a year.“We can be proud of our record on jobs. The unemployment rate is at its lowest in over 40 years and with our National Living Wage we are making sure that the lowest-paid feel the benefit with an extra £2,000 a year.
“Now the focus has to be on ensuring that wages keep rising faster than inflation, so that living standards increase.”“Now the focus has to be on ensuring that wages keep rising faster than inflation, so that living standards increase.”
I suspect that final sentence could be a coded warning about Brexit.I suspect that final sentence could be a coded warning about Brexit.
Hammond will attend a crunch meeting of the government’s Brexit sub committee this afternoon to discuss customs arrangements, where there’s no sign of agreement.Hammond will attend a crunch meeting of the government’s Brexit sub committee this afternoon to discuss customs arrangements, where there’s no sign of agreement.
Theresa May’s ministers are split over two options -- a customs partnership, where the UK would collect tariffs on behalf of the EU, or a “max fac” model, which would use technology to police the border.Theresa May’s ministers are split over two options -- a customs partnership, where the UK would collect tariffs on behalf of the EU, or a “max fac” model, which would use technology to police the border.
My colleague Andy Sparrow will be tracking all the action in his Politics Live blog:My colleague Andy Sparrow will be tracking all the action in his Politics Live blog:
Panmure Gordon analyst Simon French suspects Britain’s labour market may be peaking - chiming with the IoD’s warning earlier.Panmure Gordon analyst Simon French suspects Britain’s labour market may be peaking - chiming with the IoD’s warning earlier.
Amidst a good set of UK labour market stats there are just signs that demand may be leveling off with vacancies rolling over and the % of part time workers unable to find full time work plateauing. pic.twitter.com/7l2BcExmEBAmidst a good set of UK labour market stats there are just signs that demand may be leveling off with vacancies rolling over and the % of part time workers unable to find full time work plateauing. pic.twitter.com/7l2BcExmEB
Nearly two years after the Brexit vote, we can now see that the number of citizens from other European Union countries working in Britain has fallen.Nearly two years after the Brexit vote, we can now see that the number of citizens from other European Union countries working in Britain has fallen.
The ONS reports that the total EU workforce in Britain fell by 28,000 over the last year.The ONS reports that the total EU workforce in Britain fell by 28,000 over the last year.
That’s the first annual decrease since January to March 2010, when the UK has fallen into recession after the financial crisis.That’s the first annual decrease since January to March 2010, when the UK has fallen into recession after the financial crisis.
Here’s the details from today’s labour market report:Here’s the details from today’s labour market report:
There were 28.73 million UK nationals working in the UK, 417,000 more than for a year earlier.There were 28.73 million UK nationals working in the UK, 417,000 more than for a year earlier.
There were 2.29 million EU nationals working in the UK, 28,000 fewer than for a year earlier.There were 2.29 million EU nationals working in the UK, 28,000 fewer than for a year earlier.
There were 1.25 million non-EU nationals working in the UK, 20,000 more than for a year earlier.There were 1.25 million non-EU nationals working in the UK, 20,000 more than for a year earlier.
The employment rate (the proportion of people aged from 16 to 64 years who were in work) was 81.9% for EU nationals, higher than that for UK nationals (75.6%) and higher than that for non-EU nationals (63.0%)The employment rate (the proportion of people aged from 16 to 64 years who were in work) was 81.9% for EU nationals, higher than that for UK nationals (75.6%) and higher than that for non-EU nationals (63.0%)
For January to March 2018, there were 2.29 million EU nationals working in the UK, 28,000 fewer than for a year earlier https://t.co/MFYBeaQ6xH pic.twitter.com/CcnbN3gMvmFor January to March 2018, there were 2.29 million EU nationals working in the UK, 28,000 fewer than for a year earlier https://t.co/MFYBeaQ6xH pic.twitter.com/CcnbN3gMvm
There was a sharp fall in the number of workers from Eastern European countries who joined the EU in 2004.There was a sharp fall in the number of workers from Eastern European countries who joined the EU in 2004.
The Press Association’s Ian Jones has the details:The Press Association’s Ian Jones has the details:
First year-on-year fall since 2010 in the number of EU nationals working in the UK. Down (slightly) from 2.32m in Jan-Mar 2017 to 2.29m in Jan-Mar 2018.First year-on-year fall since 2010 in the number of EU nationals working in the UK. Down (slightly) from 2.32m in Jan-Mar 2017 to 2.29m in Jan-Mar 2018.
Biggest year-on-year fall since comparable records began (1997) in the number of EU8 nationals working the UK. Down from 1.01m in Jan-Mar 2017 to 917,000 in Jan-Mar 2018.Biggest year-on-year fall since comparable records began (1997) in the number of EU8 nationals working the UK. Down from 1.01m in Jan-Mar 2017 to 917,000 in Jan-Mar 2018.
(EU8 countries: Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia)(EU8 countries: Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia)
How the year-on-year change for EU nationals in employment has turned negative. pic.twitter.com/1mLxhB2ShCHow the year-on-year change for EU nationals in employment has turned negative. pic.twitter.com/1mLxhB2ShC
The proportion of UK men in work has hit 80% for the first time since 1991 - despite fears that robots will eliminate millions of jobs:The proportion of UK men in work has hit 80% for the first time since 1991 - despite fears that robots will eliminate millions of jobs:
UK's post-crisis jobs boom means we've hit 80% male employment for the first time since 1991 - big achievement when some US economists tell us that its technology etc that means less and less men working is inevitable pic.twitter.com/JCEulWO3yoUK's post-crisis jobs boom means we've hit 80% male employment for the first time since 1991 - big achievement when some US economists tell us that its technology etc that means less and less men working is inevitable pic.twitter.com/JCEulWO3yo
The Institute of Directors fears that companies are now struggling to find properly skilled and qualified workers.The Institute of Directors fears that companies are now struggling to find properly skilled and qualified workers.
Seamus Nevin, the IoD’s head of policy research says:Seamus Nevin, the IoD’s head of policy research says:
“Yet again we’ve seen great employment figures as the number of people in work increased and the number of people without work decreased. All of this suggests, however, that access to staff may be peaking as the labour market tightens.“Yet again we’ve seen great employment figures as the number of people in work increased and the number of people without work decreased. All of this suggests, however, that access to staff may be peaking as the labour market tightens.
“Employers are finding it increasingly difficult to recruit the people they need. Given access to skills is currently one of the highest concerns for IoD members, today’s figures also highlight the imperative for government to reform the Tier 2 visa cap to allow employers to recruit the overseas workers they need to grow in the short term.”“Employers are finding it increasingly difficult to recruit the people they need. Given access to skills is currently one of the highest concerns for IoD members, today’s figures also highlight the imperative for government to reform the Tier 2 visa cap to allow employers to recruit the overseas workers they need to grow in the short term.”
Disappointingly, UK productivity is falling again.Disappointingly, UK productivity is falling again.
Productivity (broadly, how much we each produced) shrank by 0.5% in the first three months of 2018, the ONS says.Productivity (broadly, how much we each produced) shrank by 0.5% in the first three months of 2018, the ONS says.
That’s because Britain’s growth rate slowed in the last quarter (to a measly 0.1%), even though companies created more jobs - meaning the amount of hours worked in the economy rose by 0.6%.That’s because Britain’s growth rate slowed in the last quarter (to a measly 0.1%), even though companies created more jobs - meaning the amount of hours worked in the economy rose by 0.6%.
Ergo, we were less productive:Ergo, we were less productive:
John Hawksworth, chief economist at PwC, says the UK economy is a mixed picture -- job creation remains strong, but productivity is a mess.John Hawksworth, chief economist at PwC, says the UK economy is a mixed picture -- job creation remains strong, but productivity is a mess.
“The great British job-creating machine kicked back into life in the first quarter of 2018, taking the employment rate to a new record high. Unemployment edged down further and regular pay growth continued to edge up as the labour market has tightened. Real pay growth, excluding bonuses, is now firmly back into positive territory.“The great British job-creating machine kicked back into life in the first quarter of 2018, taking the employment rate to a new record high. Unemployment edged down further and regular pay growth continued to edge up as the labour market has tightened. Real pay growth, excluding bonuses, is now firmly back into positive territory.
“All of this good news stands in marked contrast to the subdued GDP growth of just 0.1% estimated for the first quarter. This estimate could be revised up later but, taken at face value, it suggests that productivity growth turned significantly negative again after a couple of quarters when it seemed to be perking up.“All of this good news stands in marked contrast to the subdued GDP growth of just 0.1% estimated for the first quarter. This estimate could be revised up later but, taken at face value, it suggests that productivity growth turned significantly negative again after a couple of quarters when it seemed to be perking up.
Geraint Johnes, professor of economics at Lancaster University Management School, is disappointed that total pay growth (including bonuses) slowed to 2.6% from 2.8% a month ago.Geraint Johnes, professor of economics at Lancaster University Management School, is disappointed that total pay growth (including bonuses) slowed to 2.6% from 2.8% a month ago.
Professor Johnes, who is also research director at the Work Foundation, says this shows some weakness in the labour market:Professor Johnes, who is also research director at the Work Foundation, says this shows some weakness in the labour market:
This is a disappointing result, in that it represents a fall from the 2.8% figure achieved in February, and it means that we have to wait still longer for real wages to recover.This is a disappointing result, in that it represents a fall from the 2.8% figure achieved in February, and it means that we have to wait still longer for real wages to recover.
The single month measure shows a year-on-year growth of just 2.3%. This continued flatness in wages provides justification for the Bank of England’s decision not to raise interest rates – despite the buoyancy of the employment figures, the recovery in the labour market is quite simply not there, and rising wages clearly present no threat in terms of inflation.”The single month measure shows a year-on-year growth of just 2.3%. This continued flatness in wages provides justification for the Bank of England’s decision not to raise interest rates – despite the buoyancy of the employment figures, the recovery in the labour market is quite simply not there, and rising wages clearly present no threat in terms of inflation.”
This chart, from Fidelity International, shows how Britain is emerging from its second pay squeeze in a decade:This chart, from Fidelity International, shows how Britain is emerging from its second pay squeeze in a decade:
Tom Stevenson, investment director for personal investing at Fidelity, say:Tom Stevenson, investment director for personal investing at Fidelity, say:
“British workers are feeling marginally better off after wages grew in real terms for the second month on a trot.”“British workers are feeling marginally better off after wages grew in real terms for the second month on a trot.”
Economists are welcoming the news that basic pay in Britain is accelerating.Economists are welcoming the news that basic pay in Britain is accelerating.
It could even spur the Bank of England into raising interest rates by August - although, after policymakers left rates on hold last week, who knows for sure?It could even spur the Bank of England into raising interest rates by August - although, after policymakers left rates on hold last week, who knows for sure?
Decent set of UK labour market data this morning. Further tick up in private sector regular pay growth in Q1 lends some support to the #MPC raising rates in AugustDecent set of UK labour market data this morning. Further tick up in private sector regular pay growth in Q1 lends some support to the #MPC raising rates in August
Just released: The latest @ONS figures show some positive news for the labour market...real wages have grown for a second consecutive month. Wages increased by 2.9% in the first three months of 2018. Inflation for the same period was 2.7%. Is the incomes squeeze coming to an end? pic.twitter.com/Zo5wYPO5xLJust released: The latest @ONS figures show some positive news for the labour market...real wages have grown for a second consecutive month. Wages increased by 2.9% in the first three months of 2018. Inflation for the same period was 2.7%. Is the incomes squeeze coming to an end? pic.twitter.com/Zo5wYPO5xL
ING: "Rising UK wage growth points to summer rate hike" pic.twitter.com/xQiqCGmQJBING: "Rising UK wage growth points to summer rate hike" pic.twitter.com/xQiqCGmQJB
The percentage of people in Britain classed as ‘economically inactive’ has fallen to just 21%, its lowest level since records began 45 years ago.The percentage of people in Britain classed as ‘economically inactive’ has fallen to just 21%, its lowest level since records began 45 years ago.
That means that more people are either in work, or looking for a job.That means that more people are either in work, or looking for a job.
The ONS says:The ONS says:
There were 8.66 million people aged from 16 to 64 years who were economically inactive (not working and not seeking or available to work), 115,000 fewer than for October to December 2017 and 171,000 fewer than for a year earlier.There were 8.66 million people aged from 16 to 64 years who were economically inactive (not working and not seeking or available to work), 115,000 fewer than for October to December 2017 and 171,000 fewer than for a year earlier.
Today’s jobs report also shows that Britain’s cost of living squeeze is easing.Today’s jobs report also shows that Britain’s cost of living squeeze is easing.
Basic pay (excluding bonuses) rose by 2.9% in the first quarter of 2018, up from 2.8% a month ago.Basic pay (excluding bonuses) rose by 2.9% in the first quarter of 2018, up from 2.8% a month ago.
That means that wages are rising faster than inflation (which fell to 2.5% in March).That means that wages are rising faster than inflation (which fell to 2.5% in March).
So real basic pay (adjusted for inflation) is now growing at around 0.4%, after shrinking over recent months.So real basic pay (adjusted for inflation) is now growing at around 0.4%, after shrinking over recent months.
However, total pay (including bonuses) only grew by 2.6% during the quarter (again, down from 2.8%).However, total pay (including bonuses) only grew by 2.6% during the quarter (again, down from 2.8%).
Earnings for employees, including bonuses, increased by 2.6% on the year in cash terms, but were unchanged after taking inflation into account https://t.co/CkVT7gH5Yr pic.twitter.com/xx1yDm2x4PEarnings for employees, including bonuses, increased by 2.6% on the year in cash terms, but were unchanged after taking inflation into account https://t.co/CkVT7gH5Yr pic.twitter.com/xx1yDm2x4P
But before anyone celebrates, lets not forget that Britons are basically poorer than before the financial crisis.But before anyone celebrates, lets not forget that Britons are basically poorer than before the financial crisis.
The Office for National Statistics says:The Office for National Statistics says:
average regular pay (excluding bonuses) for employees in Great Britain was £460 per week before tax and other deductions from pay, £13 lower than the pre-downturn peak of £473 per week recorded for March 2008average regular pay (excluding bonuses) for employees in Great Britain was £460 per week before tax and other deductions from pay, £13 lower than the pre-downturn peak of £473 per week recorded for March 2008
average total pay (including bonuses) for employees in Great Britain was £489 per week before tax and other deductions from pay, £33 lower than the pre-downturn peak of £522 per week recorded for February 2008average total pay (including bonuses) for employees in Great Britain was £489 per week before tax and other deductions from pay, £33 lower than the pre-downturn peak of £522 per week recorded for February 2008