Official figures show regular pay excluding bonuses rose 3.1% year-on-year in July as job vacancies hit a record high
The 10-year anniversary of the Lehman’s collapse has prompted photographer Andy Hall to take to the streets of the City of London to see what’s changed.
The City from the street, a decade after the crash – in pictures
Let’s take another look at the markets. The pound has shed its initial gains and is now flat against the dollar and the euro, despite strong UK labour market data. Regular pay growth in July picked up to the fastest rate in three years, while job vacancies hit a record high and the unemployment rate remained at 4%, the lowest since 1975.
Even so, average weekly wages are still lower than the levels achieved before the financial crisis in 2008, remaining £31 below the pre-crisis average.
The request is likely to lead to years of legal wrangling over the case for sanctions and the amount.
China initiated the dispute in 2013, complaining about U.S. dumping duties on several industries including machinery and electronics, light industry, metals and minerals, with an annual export value of up to $8.4bn.
This news immediately sparked fears that the next round of trade war-escalation isn’t far off, sending the FTSE and DAX down 0.6% apiece.
The Dow Jones is set to join them in the red once the bell rings on Wall Street, with the futures pointing to a 70-ish point drop. That would leave the Dow the wrong side of 25,800 for the first time since the end of August, and in danger of falling further if Trump decides to announce his next set of tariffs on Chinese imports.
Ten years ago this weekend US investment bank Lehman Brothers collapsed (the biggest corporate failure in history), causing panic on both sides of the Atlantic. A decade on, where are the key players in the financial crisis?
In the six weeks following Lehmans, Radio 4 featured 233 extended interviews on the banking crisis. The biggest proportion of those interviewees – over a third – were bankers and other representatives of financial services. Just one was a union leader https://t.co/jYXvaYOvta https://t.co/7ddYMIpG6r
Here’s a bit more on the US banks’ Brexit plans from Lisa O’Carroll, who has been watching the Treasury select committee hearing with bank bosses from Barclays, Citi and JPMorgan this morning.
JPMorgan’s vice chair said his forecast of “modest” job losses of 150 to 200 between now and Brexit Day was not inconsistent with comments by the bank’s chairman Jamie Dimon that Brexit could impact 4,000 jobs.
The numbers I mentioned are to do with the short term horizon to get us through to March and then what we call Day 2.
We just don’t know what is going to happen in the future.
The German ZEW economic sentiment survey, also out this morning, improved moderately. The main index rose to -10.6 in September from -13.7 in August, but stayed at its third-lowest level since 2012.
Professor Achim Wambach, president of the Centre for European Economic Research (ZEW) in Mannheim, said:
During the survey period, the currency crises in Turkey and Argentina intensified, while German industrial production and incoming orders were surprisingly low in July. Despite these unfavourable circumstances, economic expectations for Germany improved slightly. The considerable fears displayed by the survey participants regarding the economic development have diminished somewhat, which may in part be attributable to the new trade agreement between the USA and Mexico.
This tells the ECB that eurozone growth is stabilising, but not accelerating back to last year’s buoyant levels. However, the updated eurozone labour market data shows that wage growth is accelerating strongly, giving the green light to end QE at the end of 2018.
That indicates that financial market participants’ economic expectations continued to be bolstered by the preliminary EU-US trade deal, that took US car tariffs off the table for now. The latest news from on-going EU-US trade talks may already have help in that regard as well with the survey ending yesterday. Talks were described as “constructive” and “forward-looking”.
However, that may still change at the hand of one tweet, while US-China trade relations don’t show similar encouraging tendencies. Meanwhile, emerging markets remain under pressure and global trade is slowing underlining why confidence levels remain well below last year’s levels.
Back to the UK labour market data. Alok Sharma, the employment minister, highlighted that the unemployment rate is the lowest since the mid-1970s while employment rate (which dipped today) remains near a record high, and that 1.45 million more children are living in a home with all adults in work.
With unemployment rate still at its lowest level in 43 years, it is good to see that for the sixth month in a row wages have grown faster than inflation helping to put more money in people’s pockets. In the last quarter regular pay is up by 2.9%, 0.5% above inflation.”
Households across the country are benefiting from the security of being in work, and with increasing wages and GDP growth of 0.6% last quarter we are delivering an economy that supports working people.
Knight Frank’s latest global house price index shows that the world’s top hotspot is Malta. The Mediterranean island is leading the index for the first time with 17% annual house price growth, moving ahead of Hong Kong (16% growth). The report said a shortage of supply, combined with a robust economy (6.6% GDP growth in 2017) and a buoyant technology industry were pushing up demand.
Turkey’s travails mean that although prices are rising at an annual rate of 11%, according to the latest data from the Central Bank of the Republic of Turkey, when inflation of 16%+ is factored in, prices in real terms are now falling.
More from Lisa O’Carroll.
JP Morgan vice chairman Mark Garvin brushed off Brexit staff disruption, saying the firm has seen more “tumult” in banking in his career. He told the Treasury select committee, chaired by Nicky Morgan, when being quizzed about cost of staff moves in Brexit contingency planning:
We have been through far more tumult than this. This is an event we can very well manage. Staff know they live in a changing organisation. Compared to digitisation and other kinds of disruption this is not a massive challenge.
Our Brexit correspondent Lisa O’Carroll has been watching the Treasury select committee this morning, where senior bankers have told MPs that they are moving “hundreds” rather than thousands of staff out of London because of Brexit.
But they have warned this is only the start of a process that could see more staff sucked out of the capital.
Kevin Wall, the chief executive of Barclays Ireland said it was moving around 150 staff from London to Europe, most of these to Dublin. These are “small numbers” in the context of the “tens of thousands” the banks employs in europe.
Barclays says banks need “enhanced equivalence” with rest of EU needs to be as close as possible to “passporting” in order to be of value. Kevin Wall to treasury select committee
Suren Thiru, head of economics at the British Chambers of Commerce also highlighted some areas of concern, in particular the “alarmingly high” number of job vacancies in Britain.
The robust headline data masks several areas of concern. While there was a welcome increase in earnings growth, the gap between pay and price growth remains insufficient to convert into an appreciable pick-up in consumer spending. Sustaining meaningful real wage growth is likely to remain challenging amid subdued productivity and the escalating burden of upfront costs on businesses.
The number of job vacancies in the UK remains at an alarmingly high level, further evidence of persistent skills shortages. While the number of people in work stands close to historic highs, firms continue to report that attempting to recruit staff with the right skills is an increasingly uphill struggle, which is stifling their ability to grow and boost productivity.
Be wary of talk that a record number of UK job #vacancies is evidence of specific skills shortages and/or #Brexit flight. The figures are about where you’d expect them to be given the strength of the labour market, especially the very high employment rate.
UK employment rose just 3,000 in the three months to July, taking the number of people in work to 32.397 million.
ONS says that, tho unemployment lower than in the previous three months, there were more people not in the labour force (known as economically inactive). Surprising in a tight labour market.
Andrew Wishart, UK economist at Capital Economics, was quick to respond to the labour market data. He says they suggest that
competition for workers is finally starting to provide greater support to wages. The slowdown in total pay growth in May and June was reversed in July…
Looking ahead, there is little sign that the recent slowdown in employment will prove permanent. Even the most pessimistic leading indicators point to employment growth of 1% y/y. Meanwhile, surveys of wage growth suggest that it will sustain a pace of about 3% y/y over the remainder of the year.
You can see what wage growth has done over the past few years in this graph:
So wage growth is faster than inflation, which is currently at 2.5%. Pay growth has picked up from the three months to June, when average earnings excluding bonuses grew 2.7% but rose just 2.4% when bonuses were included.
Unemployment fell by 55,000 to 1.36 million in the three months to July from the previous three months. However, the employment rate – the proportion of people aged 16 to 64 years who were in work – edged down to 75.5% from 75.6%.
The ONS’s head of labour market statistics David Freeman said:
With the number of people in work little changed, employment growth has weakened. However, the labour market remains robust, with the number of people working still at historically high levels, unemployment down on the year and a record number of vacancies.
Meanwhile, earnings have grown faster than prices for several months, especially looking at pay excluding bonuses.
News flash: UK pay growth has (finally) picked up, according to the Office for National Statistics, apparently as hiring tailed off.
Average weekly earnings excluding bonuses rose 2.9% year-on-year in the three months to July, the fastest growth since March. In July alone, earnings were up 3.1%, the biggest increase since July 2015.
Sterling rose as much as 0.4% to $1.3072 against the dollar in London trading this morning. Against the euro, it was more or less flat at 89.02 pence.
EU leaders are expected to hold a special Brexit summit in mid-November where they hope to sign off a divorce deal.
Back to the sterling rally, which was triggered by yet another hint from the EU’s chief negotiator Michel Barnier yesterday that a Brexit deal was possible (similar to last week). Paul Donovan, chief economist at UBS Global Wealth Management, has this pithy comment:
It may be a little undignified to have sterling’s value depend on the lightest word of a French politician.
In the interminably tedious process of extricating the EU from the UK single market, something stirs. The historian Rees-Mogg completely failed to come up with an alternative to the government’s economic plan. This might strengthen Prime Minister May’s position.
US President Trump is keen to meet North Korean leader Kim. This does not matter much. Markets worried about risks ahead of the last meeting. These risks have largely gone. Markets might possibly read Trump overlooking the apparent continuation of North Korea’s nuclear program as a signal of disinterest that could be applied to the trade negotiation details.
In corporate news, JD Sports Fashion’s rapidly-growing international business has helped it ride out Britain’s highstreet malaise. The sportswear chain posted pretax profits of £122m for the six months to 4 August, up 19%.
JD, which has shops in countries from Finland to Malaysia, said like-for-like sales rose more than 3% despite “widely reported retail challenges in the UK”. However this was due to strong online sales – like-for-like sales in stores were flat.
Sterling has just hit a fresh five-week high of $1.3060, up 0.3%, following yesterday’s comments from the EU’s Michel Barnier that a Brexit deal was possible by November.
The FTSE 100 index in London has slipped 0.2% on the firmer pound, while Germany’s Dax and France’s CAC are up 0.2% and 0.3% respectively.
The pound is up 0.2% against the dollar so far today. The EU’s chief negotiator in the Brexit talks, Michel Barnier, is in Strasbourg today, briefing MEPs.
A growing number of companies are preparing for a no-deal outcome, just in case – several pharmaceutical firms including AstraZeneca, Sanofi and Merck are stockpiling medicines in the event of a hard Brexit.
Like the whole of the food and drink industry in the UK, we would prefer a good deal that allows the free flow of products as that would have less of an impact to the UK consumer.
However, we are also preparing for a hard Brexit and, from a buffering perspective for Mondelez, we are stocking higher levels of ingredients and finished products, although you can only do so much because of the shelf life of our products. We have a continency plan in place to manage [a hard Brexit], as the UK is not self-sufficient in terms of food ingredients, so that could be a challenge.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Stock markets in Asia have been boosted by news that Donald Trump wants to hold another summit with Kim Jong-un, North Korean leader, raising hopes of greater political stability in the region.
If we are realistic, we are able to reach an agreement on the first stage of the negotiation, which is the Brexit treaty, within six or eight weeks.
Link : UK pay growth picks up to fastest rate in three years – business live