All the day’s economic and financial news, including new UK unemployment and earnings figures
- UK jobless rate falls to 4.3%, lowest since 1975
- But wages only grow by 2.1%, below inflation
- Fidelity: Household finances at breaking point
- Economists: UK productivity is too weak
- The key charts
This latest fall in real wages means that British workers still haven’t recovered the earnings lost after the financial crisis.
The Resolution Foundation has calculated that average earnings are £16 per week below their peak in 2007. That means workers are around £830 per year worse off.
Continuing pay falls come with avg weekly earnings now £16 below peak. OBR forecasts suggest point of recovery now well into next decade pic.twitter.com/yPHv6pI12c
Average real public sector pay (excluding banks) is now about £20 a week below peak, or £1000 per year pic.twitter.com/chtH5tMHuL
Ben Brettell, senior economist at Hargreaves Lansdown, is also worried about Britain’s weak productivity:
The Bank of England predicts wage growth will rise to 3% next year, while inflation falls back towards the 2% target. The first part of that equation looks optimistic to me.
The only sustainable driver of real wage growth is increasing productivity – and in this respect the UK continues to lag behind its developed-world counterparts, notably the US and Germany. Unless a solution to this productivity puzzle is found, a meaningful improvement in living standards could be some way off.
Professor Geraint Johnes, Director of Research at the Work Foundation at Lancaster University, can see the rise of the ‘gig’ economy in today’s jobs report.
There have been particularly large gains in accommodation and food services (consistent with the boost to domestic tourism provided by the weak pound) and also in information and communication services.
Employment in real estate activities and in professional, scientific and technical services has declined over the quarter.
Indeed the rapid rise in employment suggests that productivity growth remains hard to come by, and this will continue to put limits on pay growth.
The number of employees increased by 292,000 to 27.10 million over the last 12 months, according to today’s report.
But the number of self-employed people also rose, by 88,000 to 4.85 million.
Jeremy Cook, chief economist at currency firm WorldFirst, says we shouldn’t celebrate the fall in the UK unemployment rate to a 42-year low.
“There are more people in work than there have been for over 40 years, yet those people are only getting poorer due to wages that can’t keep up with inflation. Pay increases are simply not coming for a multitude of reasons.
Low productivity, Brexit fears over the future of individual sectors’ trade relationships and margins cut by higher import costs have all been referenced by companies large and small so far in 2017.
Britain’s weak wage growth is leaving consumers struggling to cope, warns Ed Monk, associate director for personal investing at Fidelity International.
Monk calls today’s report a “bitter pill to swallow”, adding:
Yesterday’s UK CPI figures showed that inflation had jumped to 2.9% which means that wages are falling further behind the price we pay for goods and services.
As a result UK households will continue to have their finances stretched to breaking point.
“Lagging wages makes it more likely the Bank of England will look through rising inflation when it decides on interest rates this week.
Prices are rising above target, which creates the case for raising rates, but today’s wage data suggests all is still not right in the economy.
Ouch! The pound has fallen back from this morning’s one-year high, following the disappointing wage growth figures.
Sterling is back below $1.33; traders are concluding that the cost of living squeeze will deter the Bank of England from raising interest rates.
The UK wage growth data was as bad as it can get.
At 4.3%, Britain’s jobless rate hasn’t been this low since March to May 1975, when Harold Wilson was prime minister:
Breaking! Britain’s unemployment rate has fallen to a new 42-year low of 4.3%, in the three months to July.
That’s down from 4.4% a month ago, and the lowest since 1975.
The boss of JP Morgan has weighed in on the cryptocurrency debate, declaring that Bitcoin is “a fraud” that will end in tears.
The currency isn’t going to work. You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart.
“If you were in Venezuela or Ecuador or North Korea or a bunch of parts like that, or if you were a drug dealer, a murderer, stuff like that, you are better off doing it in bitcoin than US dollars.
A decade after the run on Northern Rock, Britain’s banking sector is unprepared to handle another crisis.
That’s according to a new report by the Adam Smith Institute, the right-wing thinktank, which argues that the Bank of England is failing to police the banks properly.
Economist Rupert Seggins is tweeting some good charts to get us up to speed, ahead of today’s UK jobs report.
They shows how real wages (adjusted for inflation) have been falling for several months, even as the unemployment rate hits its lowest since the 1970s.
1. UK labour market stats today. The headline was given to us yesterday. Pay squeeze. Using the CPI, real pay is expected to fall -1%y/y. pic.twitter.com/ZgzXl4IARn
2. The UK employment juggernaut is expected to rumble on. Consensus forecast says 154,000 more in employment in the 3 months to July. pic.twitter.com/cEBK6vSlUB
4.The (rough) historical relationship between wage growth & unemployment may still be there. Sort of. Light at the end of the pay squeeze? pic.twitter.com/iDDXr8rmIi
The strength of the pound is pulling shares down in London this morning.
The FTSE 100 has shed 58 points, or 0.8%, to 7354. Mining giants, oil companies and major exporters, such as pharmaceutical group Shire and drinks firm Diageo, are among the fallers.
The miners have all moved lower, while BP and Shell are both down half a percent. However, the main reason for the UK index’s decline was the pound’s latest climb.
The British pound has seen “tremendous strength this week”, says Naeem Aslam of Think Markets, adding:
If you want to see a currency which is having one of the best runs this week, then look no further.
Sterling has also risen against the euro, gaining 0.2% to €1.1124.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The pound has hit a new one-year high this morning, as the City braces for a new health-check on Britain’s jobs market.
For average earnings the story continues to be disappointing.
A solid wages number could shift the calculus on the MPC further towards a rate rise with chief economist Andrew Haldane likely to join the other two hawks Michael Saunders and Ian McCafferty in pushing for a rate rise, given recent comments he made during the summer, when inflation ticked up to the same level it is now.