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Workers face ‘year of pain’ as real wages fall at fastest rate in 20 years – business live


UK pay falls at fastest rate in more than 20 years

Regular real pay in the UK fell at the fastest rate in over two decades in April, as wages fell further behind rising prices.

In April alone, regular pay packets (excluding bonuses) shrank by 3.4% once you adjust for inflation.

That’s the biggest monthly fall, year-on-year, in at least 20 years, today’s data from the Office for National Statistics shows (these figures go back to 2001).

Stephen Evans, Chief Executive of Learning and Work Institute, says we face a year of pain.

“The cost of living crisis is hitting hard with real regular wages falling more sharply this month than in any month this century.

We face a year of pain. The Chancellor has increased the help on offer and needs to prepare to do more. We also need an urgent focus on getting our economy moving again so living standards can rise.

Tony Wilson, director of the Institute for Employment Studies, says this is “really grim news” on pay and is only likely to get worse.

Despite the tightest labour market on record, nominal pay is broadly flat meaning that rocketing inflation is leading to the largest cuts in real pay in at least two decades. The picture is particularly bad for public sector workers, with real pay falling by nearly 6% year on year.

At the same time while employment is starting to pick up, there’s still a million people missing from the labour force compared to pre-pandemic trends – particularly older people, those with health conditions and overseas workers. The large rises in long-term ill health are particularly concerning, with a quarter of a million more people outside the labour force than before the pandemic.

TUC: real wages falling off a cliff

Unions are urging ministers to raise public sector pay, to help workers with the cost of living crisis.

Today’s jobs report shows that total public sector pay only rose by 1.5% per year in February-to April, while total private sector pay rose 8.0% [this is all before inflation].

UK pay growth
Photograph: ONS

TUC General Secretary Frances O’Grady said:

“Working families deserve financial security.

“But real wages are falling off a cliff as the cost of living soars.

“Millions of workers are being forced to choose between paying their bills or feeding their families. That isn’t right.

“We urgently need action to get people the pay rise they deserve. That means boosting the minimum wage, a real public sector pay rise, and the government supporting – not attacking – unions who are campaigning hard for fairer pay.

The trade union movement are holding a march across London on Saturday, to demand action on the cost of living (details here).

Gary Smith, GMB General Secretary, says the drop in real wages means people are hurting:

“But this Prime Minister – and the boss of the Bank of England – are happy to tell workers to show restraint; that they shouldn’t ask for a proper pay rise.

”It’s out of touch and tin-eared. They just don’t understand what people are going through.”

Minister for Employment, Mims Davies MP, says the government is offering help to get people into jobs:

“Today the unemployment rate remains close to a 50 year low, and still below pre-pandemic levels, with almost 2 million more women in work than 2010. That’s fantastic news, but there’s more to do.

“Work is the best way for people to provide for their families – those going into full time employment could be at least £6,000 better off than out of work on benefits. That’s why we’ve launched the Way to Work campaign to get half a million more people into jobs.

From job opportunities in Jobcentres to skills bootcamps for people considering a new industry, there’s a huge amount of help out there, and our Work Coaches are working tirelessly to get people at any age, or career stage, into fulfilling and stable employment.

This chart shows just how sharply wages fell behind inflation in April — the month in which the energy price cap jumped 54%.

It shows that the spending power of UK households fell the most in at least 21 years as wage increases were eaten up by the fastest inflation in decades, as Bloomberg explain here.

The fall in regular real pay shows that fears of a wage-price spiral are misplaced, explains Torsten Bell of Resolution Foundation.

If you’re looking for a turning point in today’s jobs data this is it: first rise in short term unemployment since 2020, and overall unemployment actually rose in April. Too early to tell for sure, but some in @bankofengland will welcome signs of a cooling labour market pic.twitter.com/nnheyDk2Lz

— Torsten Bell (@TorstenBell) June 14, 2022

Little sign of older workers that have dropped out of the labour market are returning – fall in inactivity is largely about pandemic surge in students unwinding. I really wouldnt be counting on this cohort of older workers ever returning pic.twitter.com/7gizdvTjvb

— Torsten Bell (@TorstenBell) June 14, 2022

Big picture remains a strong labour market for this stage in the recovery, pay growth reflects that (especially if you get a bonus in finance) although it’s being wiped out by the highest inflation in four decades. But the news? There are some signs of cooling off setting in

— Torsten Bell (@TorstenBell) June 14, 2022

If you want more good news for the @bankofengland note typical pay actually FELL on the month in May in the HMRC data, as did mean pay in April. That’s in cash terms – anyone that sees a wage/price spiral in that data has something strong in their coffee this morning

— Torsten Bell (@TorstenBell) June 14, 2022

UK pay falls at fastest rate in more than 20 years

Regular real pay in the UK fell at the fastest rate in over two decades in April, as wages fell further behind rising prices.

In April alone, regular pay packets (excluding bonuses) shrank by 3.4% once you adjust for inflation.

That’s the biggest monthly fall, year-on-year, in at least 20 years, today’s data from the Office for National Statistics shows (these figures go back to 2001).

Stephen Evans, Chief Executive of Learning and Work Institute, says we face a year of pain.

“The cost of living crisis is hitting hard with real regular wages falling more sharply this month than in any month this century.

We face a year of pain. The Chancellor has increased the help on offer and needs to prepare to do more. We also need an urgent focus on getting our economy moving again so living standards can rise.

Tony Wilson, director of the Institute for Employment Studies, says this is “really grim news” on pay and is only likely to get worse.

Despite the tightest labour market on record, nominal pay is broadly flat meaning that rocketing inflation is leading to the largest cuts in real pay in at least two decades. The picture is particularly bad for public sector workers, with real pay falling by nearly 6% year on year.

At the same time while employment is starting to pick up, there’s still a million people missing from the labour force compared to pre-pandemic trends – particularly older people, those with health conditions and overseas workers. The large rises in long-term ill health are particularly concerning, with a quarter of a million more people outside the labour force than before the pandemic.

European markets open a little higher

European stock markets have risen in early trading, after sharp tumbles on Monday as global stocks were hammered by recession fears.

The FTSE 100 index has nudged up by 22 points, or 0.3%, to 7227 points (after losing over 110 points on Monday)

Banks and housebuilders are leading the risers, with HSBC up 2.6%, Natwest gaining 2.2% and Barratt Development 2.1% higher.

Germany’s DAX has gained 0.8%, while France’s CAC is up 0.5%, as they also claw back some losses.

European stock markets
European stock markets Photograph: Refinitiv

Richard Hunter, Head of Markets at interactive investor, says it’s been a bruising start to the week as fears of recession begin to mount – driving Wall Street into a bear market last night.

Unsurprisingly, the sour mood passed over into Asian markets, where the prospects of a delayed reboot to the Chinese economy in light of further lockdowns added to the global growth concerns. More positively, the possibility of some monetary easing from the Chinese authorities and that much of the bad news is being priced in has left the optimists with some small room for manoeuvre.

In the UK, a positive open for stocks did little to erase the damage caused by the previous day’s decline. Having spent much of the year in positive territory as compared to many of its global peers, the FTSE100 is now down by 1.6% in the year to date.

Today’s respite could yet prove to be brief, especially if there are any further shocks to come on the scale of central bank tightening.

There are still nearly 450,000 more people neither working or looking for work than before the pandemic, despite a small drop in economic inactivity in April.

That includes 225,000 more people with long-term sickness, and 26,000 temporarily ill.

“Economic inactivity” has fallen slightly but the number of people in the UK who are not in work and not looking for a job is c450,000 higher than pre-COVID.

This is colossal change and not often talked about.

More demand in system + fewer people in work = more wage pressure. pic.twitter.com/rvTzByNbzR

— Joel Hills (@ITVJoel) June 14, 2022

Capital Economics: early signs of softening

Today’s jobs report could be an early sign that the slowdown in economic activity this year is hitting the labour market, says Paul Dales, chief UK economist at Capital Economics.

The 177,000 rise in employment in the three months to April beat the consensus forecast of a 107,000 again, but even so the unemployment rate edged up from 3.7% to 3.8% (consensus 3.6%).

What’s more, the single month data showed that employment fell by 254,000 in April itself and the unemployment rate rose from 3.5% in March to 4.2%.

What’s more, the number of job vacancies hardly rose at all, from 1.296m in April to 1.300m in the three months to May. And our own seasonal adjustments of the single-month data suggest that vacancies fell in May for the first time since COVID-19 was rife in December.

Political reaction

Chancellor of the Exchequer, Rishi Sunak, says his £15bn cost of living package will help families through the cost of living squeeze.

“Today’s stats show our jobs market remains robust with redundancies at an all time low.

“Helping people into work is the best way to support families in the long term, and we are continuing to support people into new and better jobs.

“We are also providing immediate help with rising prices – 8 million of the most vulnerable families will receive at least £1,200 of direct payments this year, with all families receiving £400.”

But Jonathan Ashworth MP, Labour’s Shadow Work and Pensions Secretary, says the government is far too complacent about the challenge:

Work should be the best defence from the rising cost of living yet millions in work are in poverty, real wages are plummeting, the numbers in overall employment are below pre-pandemic levels, and the numbers on out of work benefits not looking for work is higher than pre-pandemic.

“With record vacancies in the labour market and inflation at the highest level for 40 years, ministers have shown utter complacency about the huge levels of economic inactivity.

“In contrast, Labour will reform employment support to help people return to work, tackle the rising the cost of living, and build a prosperous economy with quality well-paid jobs.”

Bonuses are making a huge difference to the impact of rising prices.

Include them, and total pay outpaced inflation, just. That’s partly due to a boom year in the City — British bankers collected the biggest bonuses since before the 2008 global financial crisis ealier this year.

But most people don’t get bonuses — and their basic pay saw the biggest drop since 2011 after inflation.

The biggest decline in inflation-adjusted regular pay in the UK since late 2011 at -2.2%… BUT bonus payments continue to make total average pay +ve in real terms (+0.4%). pic.twitter.com/TmO4TQ90Qe

— Stuart McIntyre (@stuartgmcintyre) June 14, 2022

The belt-tightening intensifies as prices rise faster than wages.

Strong bonuses have kept total pay rising in line with inflation. But for anyone who hasn’t had a bonus (most people) disposable income (February – April) fell in real terms by 2.2% on the year. pic.twitter.com/8wz82sxNKJ

— Joel Hills (@ITVJoel) June 14, 2022

Kitty Ussher, Chief Economist at the Institute of Directors, says firms are hiring as fast as they can, with payrolls and vacancies both up in the last quarter.

This suggests order books remain strong and there is still plenty of demand in the economy.

“Encouragingly for businesses struggling with staff shortages, more people are now also being tempted to re-join the labour market having slipped into inactivity during the pandemic: the employment rate is up 0.2% on the previous quarter. If this trend continues, it should make future vacancies easier to fill, and also reduce inflationary pressure.

“However, there are also early signs that the labour market is beginning to settle, with the rate of unemployment steadying at its new low level in recent months, a small increase in short-term unemployment, and a slowing of the rate of increase in vacancies.”

Here’s some snap analysis of the jobs report, from Sam Avanzo Windett, deputy director at the Learning and Work Institute:

Today’s @ONS stats show interesting changes in unemployment – people becoming unemployed (up to 6months) saw the largest increase since late 2020. People unemployed between 6 -12 months has decreased to a record low, and unemployed 12 months+ also continued to decrease.

— Sam Avanzo Windett (@SamanthaWindett) June 14, 2022

We may be seeing the rise in economic inactivity top out, with today’s @ONS figures showing the economic inactivity rate decreased by 0.1 percentage points to 21.3% in February to April 2022 (the drop largely driven by students)

— Sam Avanzo Windett (@SamanthaWindett) June 14, 2022

Whilst we see the cost of living continue to bite, with real terms regular pay (exc. bonuses and adjusted for inflation) falling on the year by 2.2% @ONS

— Sam Avanzo Windett (@SamanthaWindett) June 14, 2022

ONS: It’s a mixed picture

Today’s jobs report continues to show a mixed picture for the labour market, says Sam Beckett, head of economic statistics at the Office for National Statistics (ONS).

“While the number of people in employment is up again in the three months to April, the figure remains below pre-pandemic levels.

“Moreover, although the number of people neither in work nor looking for a job has fallen slightly in the latest period, that remains well up on where it was before Covid-19 struck.

“At the same time, unemployment is close to a 50-year low point and there was a record low number of redundancies.

“Job vacancies are still slowly rising, too. At a new record level of 1.3 million, this is over half a million more than before the onset of the pandemic.”

“The high level of bonuses continues to cushion the effects of rising prices on total earnings for some workers, but if you exclude bonuses, pay in real terms is falling at its fastest rate in over a decade.”

Introduction: UK jobless rate rises as basic pay lags inflation

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

The UK’s unemployment rate has risen, as regular pay continues to fall behind inflation at the fastest rate in a decade.

The latest jobs data, just released, show that the unemployment rate rose to 3.8% in the three months to April, as more people look for work.

That’s up from 3.7% in the quarter to March (which was the lowest in 50 years), and may show the UK’s jobs recovery is softening.

⚠️ First uptick in the UK unemployment rate since the Covid crisis. May be a blip… but the message is clear: the easy part of the UK economic recovery is behind us & things are starting to turn. Watch the UK closely… will be a canary in the coalmine for a global downturn $GBP pic.twitter.com/4J1lb8eFsc

— Viraj Patel (@VPatelFX) June 14, 2022

Basic pay continues to lag behind rising prices too, as the cost of living crisis hits households.

Regular pay rose by 4.2% in the February-April quarter, well behind inflation which hit 9% in May.

Total pay, including bonuses, was much stronger though — up 6.8% thanks to surging bonuses in the financial sector.

So in real terms (adjusted for inflation), total pay grew by 0.4% in the quarter while regular pay tumbled by 2.2% on the year.

That’s the biggest drop in real regular pay since late 2011, adding to pressure on families struggle to pay food and energy bills.

After taking inflation into account, average pay including bonuses rose 0.4% in the year to February to April 2022, thanks to strong bonuses.

However, excluding bonuses, pay fell by 2.2% in real terms https://t.co/iB6VqmLG3N pic.twitter.com/LJL6vVrPQF

— Office for National Statistics (ONS) (@ONS) June 14, 2022

Firms are still taking on staff, though. The number of people on company payrolls increased to a fresh record high, up 90,000 in May to 29.6 million.

The number of job vacancies in March to May 2022 rose to a new record of 1,300,000. However, the rate of growth in vacancies continued to slow down.

Redundancies decreased on the quarter and are at record low levels, as firms hold onto staff.

But, the employment rate is still below pre-pandemic levels, due to the drop in self-employment in the pandemic.

More details and reaction to follow…

Also coming up today

Stock markets are in a very nervous mood, after Wall Street fell into a bear market last night.

The S&P 500 index tumbled almost 4% and closed over 20% below its record high, while US government bond prices surged, on growing expectations that the US Federal Reserve could lift interest rates very sharply on Wednesday.

A 75 basis-point rise , triple the usual move, is now seen as an option to get a grip on inflation.

This has intensified fears that central banks could push economies into recession, which has driven up the yield on government bonds dramatically.

Asia-Pacific stock markets were pounded overnight, with Australia’s main index dropping almost 4% and Japan’s Nikkei shedding 1.5%.

European stocks are due to open a little higher after Monday’s rout, but it could be another volatile day.

Bonds yesterday. Here’s hoping exhaustion sets in and they spend the day sleeping it off. So far, a nervous-looking Turnaround Tuesday…2s and 10s together at 3.34%, S&P futures up 1%, dollar a little softer. UK jobs and US PPI ahead. pic.twitter.com/Tks2BdxBZ5

— kit Juckes (@kitjuckes) June 14, 2022

The agenda

  • 7am BST: UK unemployment report for May
  • 10am BST: ZEW index of Gemran investor confidence
  • 10.30am BST: The Business, Energy and Industrial Strategy (BEIS) Committee holds a hearing into the UK’s flight cancellations
  • 11am BST: NFIB small US business optimism index
  • 1.30pm BST: US PPI index of producer prices





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