UK wages continue to lag behind inflation as the cost of living hit British workers over the summer. The latest UK labor market report, just out, shows that real pay is still falling, even as the unemployment rate hits a new near 50-year low. Average pay including bonuses rose 5.5% year-on-year in May-July, while basic pay excluding bonuses rose 5.2%, the Office for National Statistics said. While it’s quite high in nominal terms, the ONS says it’s one of the worst falls in real wages this century: Based on the CPIH measure of inflation, the ONS says: The increase in total and regular pay fell in real terms (adjusted for inflation) in the year May to July 2022, to 2.6% for total pay and 2.8% for regular pay. That’s slightly less than the record decline seen last month (3.0%), but still remains among the biggest declines in growth since comparable records began in 2001. UK actual pay Photo: ONS Nominal CPI inflation is higher than CPI. It hit 10.1% in July and could remain high for months – despite the government’s energy price cap announced last week. New labor market statistics: Real wages continue to plummet, falling 4.0% in the latest figures. The average weekly wage is £25 a week (or £109p/m) less now than it was at the same time last year. pic.twitter.com/nNx6Q0Jlxc — Alex Collinson (@Alex__Collinson) September 13, 2022 The jobs report also shows that companies are also cutting back on hiring as the energy crisis pushes the UK economy closer to recession. The number of job vacancies in June to August fell by 34,000 to 1,266,000, the biggest quarterly decline since June to August 2020. But in better news, the total number of jobs in the UK has risen by 290,000 to a record 35.8 million. This means it has surpassed the pre-coronavirus level of December 2019 for the first time. The UK unemployment rate is now the lowest since May to July 1974 – the ONS says it fell to 3.6% in the three months to July, down from 3.8% in the previous quarter. “The unemployment rate for May to July 2022 fell 0.2 percentage points in the quarter to 3.6%, the lowest rate since May to July 1974.” – ONS. — Andy Verity (@andyverity) September 13, 2022 However, the economic inactivity rate rose 0.4 percentage points to 21.7% as more people left the labor market in May-July. This is 1.5 percentage points higher than before the coronavirus pandemic, showing the long-term impact of Covid-19 on the workforce. More details and reactions to follow….
Also coming today
UK businesses are gearing up for the Queen’s state funeral. A number of retailers including Aldi, John Lewis, Waitrose, Primark and Homebase have decided to close their shops next Monday… … while hotel prices in London have soared in line with increasing demand from foreign dignitaries and members of the public wishing to pay their respects. In the economy….investors are hoping to learn today that the pace of US inflation may have slowed over the past month. The US CPI is expected to have slowed in August for the second month in a row to an annual rate of around 8.1%, from 8.5% in July. Prices may have fallen 0.1% month-on-month in August thanks to lower energy costs (gasoline has been falling steadily for weeks), as they were flat in July. However, core inflation, which strips out volatile measures such as energy, is expected to have risen 0.3% over the month. A slowdown in inflation could take some pressure off America’s central bankers, who are expected to raise interest rates by another 75 basis points (three-quarters of a point) at their next meeting. European stock markets are expected to open lower after strong gains yesterday as Ukraine’s sweeping advances against Russia eased some investors’ fears of a protracted energy crisis in Europe.
THE AGENDA
7 am BST: UK Labor Market Report 8 a.m. BST: Kantar Grocery Inflation Report 10 am. BST: ZEW index of the German economic climate 1.30 p.m. BST: US Inflation Report for August 3 p.m. BST: TIPP survey on US economic optimism for September
Updated at 07.47 BST Important events BETA filters Key facts (9) United Kingdom (6) Kantar (3) Aldi (3) Office for National Statistics (3)
ING: Pressures on the NHS are leading to longer illness
Relentless pressures on the National Health Service are contributing to a rise in people unable to work due to long-term illness, analysts say. Today’s jobs report shows that there are 352,011 more people unemployed due to long-term illness than in December 2019-February 2020. James Smith, developed markets economist at ING, says the “dramatic increase” in people leaving the workforce due to illness (see previous post) is “linked to pressure on the NHS”: At a headline level, the latest UK jobs numbers don’t look too bad. Unemployment fell by two-tenths of a percent to 3.6%, the lowest level since 1974. But this was not due to an increase in the number of people in work, but mainly to another dramatic increase in those classified as inactive – meaning neither at work nor actively pursue it. Worryingly, the number of people classed as out of work due to long-term illness has risen by almost 400,000 since the end of 2019 and by almost 150,000 in the last two months of data alone. It is hard to escape the conclusion that this is linked to pressures on the NHS. UK Labor Market Report Photo: ING
Full story: UK wage growth lags inflation as cost-of-living crisis bites
Philip Inman Wage growth failed to keep up with price growth in July despite a rise in average wages, according to official data which showed the cost of living crisis continued to affect millions of households throughout the summer. Average pay including bonuses rose 5.5% in the quarter to July, while regular pay (excluding bonuses) rose 5.2%, up from 4.7% in June. Workers continued to be hit hardest in the public sector, where regular pay rose by 2%, compared to 6% in the private sector. Annual inflation was 10.1% in July, the highest level in 40 years. The rise in wages came amid a drop in unemployment, which fell to its lowest level since 1974, but the trend for wages to fall behind inflation persisted Britain’s two German-owned discount supermarket chains have broken the power of the Big Four in the grocery sector, with Aldi officially overtaking Morrisons for market share. Kantar’s Fraser McKevitt explains: Back in the early 2010s, Tesco, Sainsbury’s, Asda and Morrisons combined accounted for more than three-quarters of the industry, but that traditional big four no longer exists. Discounters have seen dramatic sales increases in recent months, bringing more and more customers through their doors. Aldi has done well to expand its consumer base, supported by steady store openings and with 14.2 million shoppers visiting the grocer over the past three months. Meanwhile, for the fourth month in a row, Lidl was the fastest growing grocer and recorded its strongest sales performance since October 2014.
UK grocery inflation hits record 12.4%
Supermarket inflation has soared to 12.4% as households continue to be hit by rising costs. Food price inflation hit a new record last month, adding more than £570 to the average annual bill, according to market researcher Kantar. This has encouraged more customers to turn to discount retailers as they try to manage their stretched budgets (as wages do not keep pace with prices). Fraser McKevitt, head of Retail and Consumer Insight at Kantar’s Worldpanel Division, warns that “there appears to be no end to grocery inflation”. McKevitt says: Now at 12.4% for August, the latest figure means the average annual grocery bill will go from £4,610 to £5,181 if consumers don’t make changes to what they buy and how they shop to cut costs . That’s an extra £572 a year. Categories such as milk, butter and dog food are growing particularly fast with 31%, 25% and 29% respectively. Kantar also reports that German discounter Aldi has overtaken Morrisons to become Britain’s fourth-largest supermarket group. Aldi’s sales rose 18.7% in the 12 weeks to 4 September 2022, reaching a 9.3% market share and making it Britain’s fourth-biggest supermarket for the first time. Meanwhile, Lidl increased its sales by 20.9% and its market share rose to 7.1%. Updated at 08.24 BST
Ocado shares fall as customers dwindle
Julia Kollewe In the City, shares in online grocer Ocado have fallen almost 10% after it warned customers were falling. My colleague Julia Kollewe explains: Ocado has warned that annual sales will fall as customers trade up lower value products and buy less overall amid a worsening cost of living crisis. The online grocer, which is part-owned by Marks & Spencer, said sales rose 2.7% from a year ago in the 13 weeks to August 28, an improvement from a fall in the previous quarter. However, faced with rising energy bills and higher food prices, shoppers are putting less in their baskets and looking for cheaper products. The value of the average basket fell 6%, from £123 to £116. Here’s the full story: Updated at 08.14 BST We are now starting to see signs that the labor market is losing momentum, warns Jack Kennedy, UK economist at global job site Indeed, with the employment rate and number of vacancies falling. He adds: “At the same time, it remains extremely tight with vacancies, however, remaining near record levels and economic activity reversing its recent declines to rise to its highest level since 2016. This has been driven by people at opposite ends of the spectrum. driven largely by 16- to 24-year-olds and 50- to 64-year-olds. This labor market participation gap means that recruitment has become even more challenging for…
