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| UK cost of living crunch ‘just begun’ as real wages fall; oil hits seven-year high – business live | |
| (32 minutes later) | |
| Rolling coverage of the latest economic and financial news | Rolling coverage of the latest economic and financial news |
| 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). | |
| Pay for workers in Britain has fallen in real terms for the first time in more than a year, despite signs that employers shrugged off concerns over the Omicron coronavirus variant to continue hiring in December. | |
| Average wages, after taking account of inflation, dropped in November for the first time since July 2020 amid growing concerns over the hit to living standards this year from high inflation and surging energy bills. | |
| The Office for National Statistics said although average total earnings grew at an annual rate of 4.2% in November, the impact from soaring rates of inflation meant workers suffered a 0.9% real-terms cut in their pay packets. The official rate of inflation reached a 10-year high of 5.1% in November. | |
| The number of employees on UK company payrolls rose by 184,000 on the month to 29.5 million, an increase of 409,000 on pre-pandemic levels as the jobs market continues to recover from Covid-19. | |
| Reflecting staff shortages across the economy, the number of job vacancies rose for most industries over the three months to December to a record 1.2 million despite a slowdown in the rate of growth in recent months. | |
| Frances O’Grady, the general secretary of the TUC, said: | |
| Here’s the full story: | |
| Back in the markets, oil has hit its highest level in seven years as tensions rise in the Middle East. | |
| Brent crude, the international benchmark, rose to $88 per barrel for the first time since October 2014, which could push up fuel costs in coming weeks. | |
| US crude also hit fresh seven-year highs, amid fears of supply disruptions after Yemen’s Houthi group claimed responsibility for an apparent drone attack in Abu Dhabi that killed three people. | |
| The attack is likely to raise regional tensions as a crucial phase nears in nuclear discussions with Iran, as Martin Chulov, our Middle East correspondent, explains: | |
| The Saudi-led coalition fighting Yemen’s Houthi insurgents said yesterday it had launched air strikes targeting the rebel-held capital Sanaa, following the attack against Abu Dhabi. | |
| AJ Bell investment director Russ Mould says: | |
| Goldman Sachs expects oil prices hitting $100 per barrel in the second half of this year, citing a lower than expected hit to demand from the Omicron coronavirus variant coupled with increased supply disruptions and OPEC+ shortfalls. | |
| “This has kept the global oil market in a larger deficit than even our above consensus forecast,” Goldman said in a note dated Monday, Reuters reports. | |
| TUC General Secretary Frances O’Grady says: | TUC General Secretary Frances O’Grady says: |
| Today’s jobs data suggest that labour demand has remained fairly strong, that supply is struggling to keep up and that the squeeze on household real wages is only just beginning, says Paul Dales of Capital Economics. | Today’s jobs data suggest that labour demand has remained fairly strong, that supply is struggling to keep up and that the squeeze on household real wages is only just beginning, says Paul Dales of Capital Economics. |
| The legacy of the pandemic is a rise in economic inactivity, warns the Institute of Directors. | The legacy of the pandemic is a rise in economic inactivity, warns the Institute of Directors. |
| Kitty Ussher, chief economist at the Institute of Directors, flags that some people have left the jobs market because they’re not well enough to work: | Kitty Ussher, chief economist at the Institute of Directors, flags that some people have left the jobs market because they’re not well enough to work: |
| Labour MP Alison McGovern warns the struggle to fill jobs is holding back the economy: | Labour MP Alison McGovern warns the struggle to fill jobs is holding back the economy: |
| The UK economy faces a double whammy of falling real wages and labour shortages. | The UK economy faces a double whammy of falling real wages and labour shortages. |
| Naomi Clayton, acting director of Policy and Research at Learning and Work Institute, has tweeted the key charts: | Naomi Clayton, acting director of Policy and Research at Learning and Work Institute, has tweeted the key charts: |
| Reuters’ David Milliken points out that the jobless rate had fallen back, close to its pre-pandemic levels - but rising inflation is eating into wages. | Reuters’ David Milliken points out that the jobless rate had fallen back, close to its pre-pandemic levels - but rising inflation is eating into wages. |
| Labour MP Barry Sheerman is also concerned that real wages fell in November: | Labour MP Barry Sheerman is also concerned that real wages fell in November: |
| Meanwhile in the City, stocks have opened lower as investors worry that America’s central bank will hike interest rates several times this year to fight inflation. | Meanwhile in the City, stocks have opened lower as investors worry that America’s central bank will hike interest rates several times this year to fight inflation. |
| The FTSE 100 index has dropped by 59 points, or 0.8%, to 7552, away from the two-year high hit yesterday. | The FTSE 100 index has dropped by 59 points, or 0.8%, to 7552, away from the two-year high hit yesterday. |
| Online estate agent portal Rightmove (-3%), UK/US plumbing and heating firm Ferguson (-2.7%) and tech-focused investment trust Scottish Mortgage (-2.6%) are the top fallers. | Online estate agent portal Rightmove (-3%), UK/US plumbing and heating firm Ferguson (-2.7%) and tech-focused investment trust Scottish Mortgage (-2.6%) are the top fallers. |
| European markets have dropped over 1%, while Wall Street is expected to open lower. | European markets have dropped over 1%, while Wall Street is expected to open lower. |
| Sovereign bond yields (the interest rate on government debt) is also rising, as Victoria Scholar, head of investment at interactive investor, explains: | Sovereign bond yields (the interest rate on government debt) is also rising, as Victoria Scholar, head of investment at interactive investor, explains: |
| Today’s jobs report increases the changes that the Bank of England lifts interest rates next month, City economists say. | 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: | 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. | 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. | 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). | 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. | 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 |