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| Real wages fall as UK cost of living squeeze bites; unemployment rate drops – business live | |
| (32 minutes later) | |
| Rolling coverage of the latest economic and financial news | Rolling coverage of the latest economic and financial news |
| UK workers are facing a pay squeeze as wages fail to keep up with inflation. | UK workers are facing a pay squeeze as wages fail to keep up with inflation. |
| Today’s labour market report shows that average total pay, including bonuses, grew by 4.2% in the September-November quarter, while basic pay (ex-bonuses) was 3.8%. | Today’s labour market report shows that average total pay, including bonuses, grew by 4.2% in the September-November quarter, while basic pay (ex-bonuses) was 3.8%. |
| Consumer price inflation (CPI) jumped to 5.1% in November, and is expected to hit 6% by this spring when energy bills rise very sharply. | Consumer price inflation (CPI) jumped to 5.1% in November, and is expected to hit 6% by this spring when energy bills rise very sharply. |
| The ONS reports that wages fell behind rising prices in November, meaning real wages shrank for the first time since July 2020: | The ONS reports that wages fell behind rising prices in November, meaning real wages shrank for the first time since July 2020: |
| In real terms (adjusted for inflation), total and regular pay have shown minimal growth in September to November 2021, at 0.4% for total pay and 0.0% for regular pay; single-month growth in real average weekly earnings for November 2021 fell on the year for the first time since July 2020, at negative 0.9% for total pay and negative 1.0% for regular pay. | In real terms (adjusted for inflation), total and regular pay have shown minimal growth in September to November 2021, at 0.4% for total pay and 0.0% for regular pay; single-month growth in real average weekly earnings for November 2021 fell on the year for the first time since July 2020, at negative 0.9% for total pay and negative 1.0% for regular pay. |
| Public sector workers were particularly hit by the pay squeeze, the ONS shows: | Public sector workers were particularly hit by the pay squeeze, the ONS shows: |
| Average total pay growth for the private sector was 4.5% in September to November 2021, while for the public sector, it was 2.6%; all sectors saw growth, with the finance and business services sector seeing the largest growth rate at 6.8%. | Average total pay growth for the private sector was 4.5% in September to November 2021, while for the public sector, it was 2.6%; all sectors saw growth, with the finance and business services sector seeing the largest growth rate at 6.8%. |
| Here’s some snap reaction: | Here’s some snap reaction: |
| Today’s jobs report increases the changes that the Bank of England lifts interest rates next month, City economists say. | |
| Thomas Pugh, economist at RSM UK, explains: | |
| The BoE lifted interest rates to 0.25% in December, away from the record lows set in the pandemic. | |
| James Smith, developed market economist at ING, also predicts a rate rise in February. | |
| But, with a severe wage-price spiral looking unlikely, Smith predicts interest rates won’t rise as fast during 2022 as the markets expect (they are currently priced at above 1% by the end of this year). | |
| Martin Beck, chief economic advisor to the EY ITEM Club, warns that wages will probably fall further behind inflation in coming months, despite the pick-up in employment. | |
| The UK’s cost of living crunch has just begun, and is going to get worse, warns Stephen Evans, chief executive of Learning and Work Institute: | The UK’s cost of living crunch has just begun, and is going to get worse, warns Stephen Evans, chief executive of Learning and Work Institute: |
| Evans also points out that the total number of people in work is still below pre-pandemic levels (even though company payrolls are higher). | Evans also points out that the total number of people in work is still below pre-pandemic levels (even though company payrolls are higher). |
| Chancellor of the Exchequer, Rishi Sunak, has welcomed the rise in payrolls and fall in redundancies: | Chancellor of the Exchequer, Rishi Sunak, has welcomed the rise in payrolls and fall in redundancies: |
| Minister for Employment Mims Davies MP says: | Minister for Employment Mims Davies MP says: |
| Here’s a chart showing how real wages fell in November, as the sharp rise in inflation this autumn overtook average weekly earnings growth. | Here’s a chart showing how real wages fell in November, as the sharp rise in inflation this autumn overtook average weekly earnings growth. |
| The ONS says: | The ONS says: |
| UK workers are facing a pay squeeze as wages fail to keep up with inflation. | UK workers are facing a pay squeeze as wages fail to keep up with inflation. |
| Today’s labour market report shows that average total pay, including bonuses, grew by 4.2% in the September-November quarter, while basic pay (ex-bonuses) was 3.8%. | Today’s labour market report shows that average total pay, including bonuses, grew by 4.2% in the September-November quarter, while basic pay (ex-bonuses) was 3.8%. |
| Consumer price inflation (CPI) jumped to 5.1% in November, and is expected to hit 6% by this spring when energy bills rise very sharply. | Consumer price inflation (CPI) jumped to 5.1% in November, and is expected to hit 6% by this spring when energy bills rise very sharply. |
| The ONS reports that wages fell behind rising prices in November, meaning real wages shrank for the first time since July 2020: | The ONS reports that wages fell behind rising prices in November, meaning real wages shrank for the first time since July 2020: |
| In real terms (adjusted for inflation), total and regular pay have shown minimal growth in September to November 2021, at 0.4% for total pay and 0.0% for regular pay; single-month growth in real average weekly earnings for November 2021 fell on the year for the first time since July 2020, at negative 0.9% for total pay and negative 1.0% for regular pay. | In real terms (adjusted for inflation), total and regular pay have shown minimal growth in September to November 2021, at 0.4% for total pay and 0.0% for regular pay; single-month growth in real average weekly earnings for November 2021 fell on the year for the first time since July 2020, at negative 0.9% for total pay and negative 1.0% for regular pay. |
| Public sector workers were particularly hit by the pay squeeze, the ONS shows: | Public sector workers were particularly hit by the pay squeeze, the ONS shows: |
| Average total pay growth for the private sector was 4.5% in September to November 2021, while for the public sector, it was 2.6%; all sectors saw growth, with the finance and business services sector seeing the largest growth rate at 6.8%. | Average total pay growth for the private sector was 4.5% in September to November 2021, while for the public sector, it was 2.6%; all sectors saw growth, with the finance and business services sector seeing the largest growth rate at 6.8%. |
| Here’s some snap reaction: | Here’s some snap reaction: |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| The UK’s unemployment rate has dropped again, as employers continue to add workers to their payroll... but wages are now lagging inflation again. | The UK’s unemployment rate has dropped again, as employers continue to add workers to their payroll... but wages are now lagging inflation again. |
| The jobless rate dropped to 4.1% in the September-November quarter, the Office for National Statistics reports. That’s down from 4.2% a month ago. | The jobless rate dropped to 4.1% in the September-November quarter, the Office for National Statistics reports. That’s down from 4.2% a month ago. |
| Payrolls continue to swell too -- the ONS estimates that employers added 184,000 more staff in December, lifting payrolls to 409,000, or 1.4%, above their pre-pandemic levels. | Payrolls continue to swell too -- the ONS estimates that employers added 184,000 more staff in December, lifting payrolls to 409,000, or 1.4%, above their pre-pandemic levels. |
| All regions are now above pre-coronavirus levels, with Scotland having the largest percentage increase on the month. | All regions are now above pre-coronavirus levels, with Scotland having the largest percentage increase on the month. |
| Vacancies hit a record high, again - with 1,247,000 vacancies in October-December, as employers continue to struggle to fill positions. | Vacancies hit a record high, again - with 1,247,000 vacancies in October-December, as employers continue to struggle to fill positions. |
| That’s 462,000 more than before the pandemic, with most industries displaying record numbers of vacancies, and the ratio of vacancies to every 100 employee jobs at a record high 4.1. However, the rate of growth in vacancies did slow, the ONS warns. | That’s 462,000 more than before the pandemic, with most industries displaying record numbers of vacancies, and the ratio of vacancies to every 100 employee jobs at a record high 4.1. However, the rate of growth in vacancies did slow, the ONS warns. |
| The redundancy rate has decreased to a record low following the end of the Coronavirus Job Retention Scheme, suggesting that the end of the furlough scheme has not had a significant impact on the jobs market. | The redundancy rate has decreased to a record low following the end of the Coronavirus Job Retention Scheme, suggesting that the end of the furlough scheme has not had a significant impact on the jobs market. |
| But, the economic inactivity rate has increased by 0.2 percentage points to 21.3%, showing that more people have dropped out of the labour market - either because they are studying, retiring early, or ill. | But, the economic inactivity rate has increased by 0.2 percentage points to 21.3%, showing that more people have dropped out of the labour market - either because they are studying, retiring early, or ill. |
| And on pay, real average weekly earnings fell in November 2021 for the first time since July 2020 (more on that in a moment). | And on pay, real average weekly earnings fell in November 2021 for the first time since July 2020 (more on that in a moment). |
| Also coming up today | Also coming up today |
| The Bank of Japan has upgraded its growth and inflation forecasts overnight, and flagged heightening chances the recent commodity-driven price hikes will broaden. | The Bank of Japan has upgraded its growth and inflation forecasts overnight, and flagged heightening chances the recent commodity-driven price hikes will broaden. |
| Japan’s prime minister Kishida Fumio, addresses the World Economic Forum’s virtual Davos Agenda today, as does Israel’s PM, Naftali Bennett. | Japan’s prime minister Kishida Fumio, addresses the World Economic Forum’s virtual Davos Agenda today, as does Israel’s PM, Naftali Bennett. |
| On the economic front, we get the lates German economic morale data, and a healthcheck on factories in the New York state area. | On the economic front, we get the lates German economic morale data, and a healthcheck on factories in the New York state area. |
| European stock markets could open lower, with bond yields rising as investors anticipate several US interest rate rises this year. | European stock markets could open lower, with bond yields rising as investors anticipate several US interest rate rises this year. |
| The agenda | The agenda |
| 8am GMT: EU finance ministers hold EcoFin meeting | 8am GMT: EU finance ministers hold EcoFin meeting |
| 10am GMT: ZEW survey of German economic sentiment | 10am GMT: ZEW survey of German economic sentiment |
| 10am GMT: Special Address by Naftali Bennett, Prime Minister of Israel, at Davos Agenda | 10am GMT: Special Address by Naftali Bennett, Prime Minister of Israel, at Davos Agenda |
| 11am GMT: Special Address by Kishida Fumio, Prime Minister of Japan, at Davos Agenda | 11am GMT: Special Address by Kishida Fumio, Prime Minister of Japan, at Davos Agenda |
| 1.30pm GMT: Empire State Manufacturing index for New York | 1.30pm GMT: Empire State Manufacturing index for New York |