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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

UK unemployment: Vacancies at record high as EU workers leave - as it happened

A job centre plus in London.
A job centre plus in London. Photograph: Bloomberg/Bloomberg via Getty Images

Afternoon summary

Time for a quick recap

EU workers are quitting the UK at the fastest rate since at least 1997. New labour markets figures show a 132,000 drop in the number of citizens from other European Union countries working in Britain.

UK employment by nationality

The trend is driving job vacancies in the UK to a record high; there are now some 845,000 unfilled positions.

Business groups warn that it’s getting harder for firms to hire qualified staff.

Today’s jobs report also shows that the UK unemployment rate has risen to 4.1%, up from a 43-year low of 4.0%. That’s because an extra 21,000 lost their jobs in the last quarter.

However, the number of people IN work rose by 23,000 during the period, taking the employment total to a new high.

There’s good news on wages too; basic pay growth picked up to 3.2% year, while total pay (including bonuses) rose by 3.1%.

That means real wages are rising, but we’re still not back at pre-crisis levels after a decade.

UK wage growth

Ian Brinkley, acting chief economist at the CIPD, sums up the situation:

“The underlying state of the labour market remains strong despite unusually weak employment growth and the consequent small rise in unemployment.

“There was a significant increase in full time and permanent employment, largely offset by falling self-employment, temporary and part time work. Regular pay strengthened slightly and, with inflation falling, real pay growth has strengthened significantly.

“The slight rise in unemployment is partly explained by more people of working age entering the labour market and actively looking for work than in the past. However, if future employment growth continues to fall short of the increase in job seekers, then further modest rises in unemployment can be expected.

“Much will depend on whether the current economic and business uncertainty over Brexit and the world economy can be reduced in the coming months.

“Employers can expect to face continued recruitment and retention pressures and need to prioritise workforce planning.”

That’s all for today, I think. Goodnight!

Back in the markets, the pound is surging amid reports that a Brexit withdrawal agreement has finally been agreed.

Sterling has surged almost two cents, to $1.3027 and on track for one of its biggest jumps this year.

It’s also hitting six-month highs against the euro, at €1.154, meaning one euro is worth 86.6p.

According to Westminster sources, cabinet ministers will be shown the text tonight, ahead of a full cabinet meeting on Wednesday.

Irish media group RTE is reporting that the plan includes a backstop agreement in which the whole UK remains in a customs arrangement, but with “deeper” provisions for Northern Ireland on the customs and regulatory side.

Our politics liveblog has all the details:

There was a particularly sharp drop in workers from eight EU countries: Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, Slovenia

This chart shows the full details:

EU migration stats

Updated

Here’s Alasdair Ross of the Economist Intelligence Unit:

The Federation of Small Businesses fears that UK firms are facing a dearth of talent, now that EU nationals are in short supply.

FSB chairman Mike Cherry says more firms are reporting problems hiring the right staff:

“More than one in three small firms now say lack of access to the right skills is holding back growth – up from roughly a quarter at this time last year.

“One in five small employers rely on staff from the EU. With net migration from Europe falling, it’s increasingly a challenge for firms to recruit from the vital pool of EU talent based here in the UK. If we don’t see a pro-business withdrawal agreement signed before the month is out, this challenge will become even more pronounced and entrenched. The Brexit clock is ticking.

“It’s critical to remember that 95 per cent of small firms have never made use of the UK’s points-based immigration system. If they’re lumbered with complex paperwork to bring in EU staff post-Brexit that will cause a significant drag on the billions they contribute to the economy each year.

Today’s jobs report shows that British firms are creating much fewer new jobs than a year ago. So, with Brexit looming, bosses must fear that the struggle to find qualified workers will only get worse.

Here’s Reuter’s take:

Unemployment unexpectedly rose to 4.1% in the three months to September from a 43-year low of 4.0% the previous quarter, as slowing job creation failed to keep pace with rising job-seeker numbers. Britain’s economy added 23,000 jobs in the third quarter, a fraction of the 350,000 created over the previous 12 months.

Moreover, in the year to September there was an exodus of workers from the eight eastern European countries which joined the EU in 2004. Their numbers fell by 154,000 to 881,000, a record 15 percent drop that overwhelmed a small rise in workers from elsewhere in the EU. Britain has said EU citizens already in the country will be free to stay after Brexit but many fear bureaucratic hurdles or see improved prospects in their home countries.

Sectors such as hotels and restaurants, social care, food processing and construction rely especially heavily on EU staff, particularly for lower-paid jobs.

“We already have record numbers of vacancies, and the signs are that these skills shortages will further intensify over the next few months as EU workers no longer find the UK an attractive place to work,” said Tom Hadley, policy director at the Recruitment and Employment Confederation trade association.

Some Brexit supporters will probably feel that that the departure of EU workers should be welcomed, as it frees up jobs for other people.

But Professor Guglielmo Meardi of Warwick Business School argues that this is wrong -- it could actually cost jobs.

Here’s his take on the 132,000 fall in EU workers in the UK:

“The record fall in the number of EU workers is not just linked with wage growth, it is also linked with the rise in unemployment.

“In some occupations these EU workers are competitors for British workers and employers now have to pay more to recruit the remaining British or foreign workforce.

“However, in other sectors they are complementary to British workers and are needed to keep business alive. Without them businesses are forced to close, contributing to the rise in unemployment.

“Ending free movement now appears to be a totally pointless aim for the UK. The effect of announcing this policy was more than enough to bring down net immigration from the EU and, given earning and demographic trends, it is very unlikely to be reversed.”

Yesterday, we were reporting that the oil price has jumped, after Saudi Arabia appeared to pave the way for supply cuts in 2019.

The situation has reversed today, though; crude prices are falling sharply. Brent crude has shed 3.35% to $67.77 per barrel, and US crud has hit its lowest level of the year.

So what changed? Well, Donald Trump weighed in last night, arguing that Opec should take steps to get the oil price down, not throttling supply to get it up again.....

Interserve insists plans are on track, as shares slide

Over in the City, outsourcing and construction firm Interserve has just insisted that its turnaround programme is on track, after watching its shares sink to a new 30-year low.

In a statement to shareholder, Interserve says:

Interserve notes recent press commentary surrounding the Group and the movement in its share price.

Interserve confirms that the implementation of the Group’s strategy and the Fit for Growth transformation programme remains on track and the Group continues to expect a significant operating profit improvement in 2018, in line with management’s expectations.

The ‘movement’ in Interserve’s shares has been sharp, and largely one-way. On Monday they shed 10%, and were down another 20% earlier today, to their lowest level since 1985.

Delays at a Derby waste energy plant have fuelled concerns over Interserve’s financial health. And pressure is mounting; this morning, one former shareholder told the BBC that Interserve would struggle to raise the extra capital it needs.

However, shares are recovering as I type - now only down 6% today, following this announcement.

Here’s the chancellor, Philip Hammond’s take:

Those budget measures included a £3bn giveaway that mainly benefited higher earners. That’s been criticised by those who think the money could have been better directed, perhaps to fund schools or to cushion the impact of universal credit.

Labour, though, have resisted pressure to oppose the measures - side-stepping a Tory tax trap?...

Here’s our economics editor Larry Elliott on the UK jobs data:

The countdown to Brexit has seen the number of workers in Britain from the former communist countries of eastern Europe fall at its sharpest rate since modern records began more than two decades ago.

Official figures covering the summer and early autumn showed a 154,000 drop over the past year in the number of people employed from eight countries – including Poland, Hungary and the Czech Republic – that joined the EU in the early 2000s.

The Office for National Statistics (ONS) said the year-on-year fall to 881,000 in the number of these workers in the period of July to September was the largest since 1997.

The annual 132,000 drop in the number of workers from the EU as a whole was also unprecedented. Employment from the rest of the world grew by 34,000.

The decline came as the latest ONS statistics showed tentative signs of easing in demand for labour but a marked increase in earnings growth.

While the number of people employed grew by 23,000 between June and September, the number of jobless people rose by 21,000 to 1.38 million. The unemployment rate edged up from 4% to 4.1%.

More here:

Geraint Johnes, professor of economics at Lancaster University Management School, has analysed today’s UK labour market report, and says it provides “mixed, but broadly favourable, news.”

Unemployment rose by some 21000 in the third quarter, and the rate now stands at 4.1%. But, with an increase in the population of over-16s, employment also rose over this period. Particularly positive is the news of a huge increase (some 104000 over the quarter) in the number of full-time employees, this being accompanied by a decline of 58000 in the number of part-time employees, and also a decline in the number of self-employed workers.

Underemployment, taking the form of people working fewer hours than they would like and working in less secure circumstances than they would like, has been a problem in recent years, but seems now to be in decline.

“The three-month measure of total pay increase rose to 3% in September, and the three-month measure of regular pay increase rose to 3.2%. The less reliable single-month figures indicate some easing off of this rate of increase in the most recent month, so the good news on pay still needs to be treated with a measure of caution. The sectors leading the growth in pay are construction and distribution.”


Work and Pensions Secretary Esther McVey.
Work and Pensions Secretary Esther McVey. Photograph: Leon Neal/Getty Images

Work and Pensions Secretary Esther McVey has flagged up that Britain is making good progress in helping disabled people into the workplace.

She says the government’s “ Disability Confident” programme, which helps firms recruit and retain disabled people and people with health conditions, is paying off.

“As we celebrate the anniversary of Disability Confident, we can see seismic shifts in opportunities for disabled people, with almost a million more in work since 2013.

“That’s empowering almost a million more disabled people with new career opportunities, and creating a brighter future.

“Since 2010, employment has risen and unemployment has fallen in every single region of the UK. And with an average of 1,000 people moving into work each and every day, and three quarters of all new jobs in permanent, full time and high skilled roles, this shows our welfare reforms are working and delivering for people across the country.”

This chart, from the Resolution Foundation think tank, shows clearly how EU nationals stopped coming to the UK to work after the EU referendum, or decided to leave:

Resolution have tweeted some more useful charts too:

Here’s economist Sam Tombs on the drop in EU nationals working in the UK:

TUC: Wage growth still disappointing

Britain’s unions aren’t impressed by the news that nominal pay (excluding inflation) has hit a 10-year high.

TUC General Secretary Frances O’Grady points out that wages are still below their pre-crisis level, once you adjust for the cost of living.

“Pay is rising at a snail’s pace and wages aren’t expected to return to their pre-crash value for at least another 6 years.

“Boosting pay packets must be a priority. That means the government putting the minimum wage up to £10 as quickly as possible. And it means giving unions the freedom to enter every workplace and negotiate fair pay rises.”

Updated

Today’s jobs report shows the impact of the high street retail crisis on Britain’s labour force:

Although 132,000 new jobs were created between June 2017 and 2018, the number of people working in wholesaling, retailing and motor vehicle repairs fell by 73,000.

This was the largest annual fall in the number of jobs in that sector since June 2010.

UK job creation by sector

Mike Jakeman, senior economist at PwC, fears that firms will keep struggling to find staff, which could push wages higher.

“This data suggests that the labour market is now pretty tight. Unemployment remains very low in historic terms, but is unlikely to fall much further, given the slowdown in job creation.

The result of this is likely to be further upward pressure on wages as companies struggle for find workers to fill vacancies. We are likely to hear much more about worker shortages in the coming year.”

UK vacancies have hit a record level
UK vacancies have hit a record level Photograph: ONS

Of course, if firms can’t hire enough staff, they’ll struggle to grow and become more productive - which isn’t great for wages in the long term.....

UK vacancies at record high

With EU workers departing, the number of unfilled jobs in the UK had hit a record level.

According to the ONS, there were 845,000 job vacancies for August to October 2018. This was:

  • 14,000 more than for May to July 2018
  • 44,000 more than for a year earlier
  • the highest since comparable records began in 2001

The Institute of Directors say the pool of labour talent is shrinking [as EU workers head for the nearest port or airport in record numbers]

Tej Parikh, senior economist at the Institute of Directors, explains:

“With pay packets finally picking up, households and retailers will have something to cheer about as we reach the festive period. Meanwhile, businesses are continuing to show resilience by opening up positions and pushing for new hires.

“However, we’re unlikely to be entering a ‘new dawn’ for persistent wage growth just yet, as firms are facing ongoing struggles investing in their productivity. Business leaders are also finding it more and more difficult to fill openings as the pool of available talent shrinks.

Updated

Pawel Adrjan, economist at jobs site indeed.com, reckons UK firms are being forced to raise wages because labour is in shorter supply, as EU workers head home.

Record fall in EU nationals in UK

Brexit is now having a significant impact on the jobs market.

Today’s unemployment report shows a record decline in the number of workers from other EU countries in the UK. However, the number of people born outside the UK working here has risen.

Here’s the details from the ONS:

  • UK nationals working in the UK increased by 448,000 to 29.00 million
  • EU nationals working in the UK fell by 132,000 to 2.25 million (the largest annual fall since comparable records began in 1997)
  • Non-EU nationals working in the UK increased by 34,000 to 1.24 million.
UK employment by nationality
UK employment by nationality Photograph: ONS

Has Britain’s long run of falling unemployment ended?....

UK unemployment rate

UK wage growth is less impressive once you account for inflation, of course.

While nominal pay jumped by 3.2% per year (a 10-year high), real pay (adjusted for inflation) only rose by 0.9% - the best since the end of 2016.

Uk wage growth

Unemployment and employment both up

  • The number of people unemployed in the UK has risen by 21,000 in July-September, driving the jobless rate up to 4.1%.

  • But.... the number of people IN work rose by 23,000 over the quarter, to 32.41m. That’s the highest total since record began in 1971, leaving the employmenr rate near a record high at 75.5%.

    • UK jobless rate and wages both rise

    BREAKING: Britain’s unemployment has risen to 4.1% in the three months to September.

    That’s up from the 43-year low of 4%.

    But there’s better news on earnings. Average pay, excluding bonuses, rose by 3.2% per year in the last quarter -- the biggest rise in a decade.

    More to follow!

    A new opinion poll suggests that the budget row hasn’t hurt the Italian government’s popularity. Support for the far-right League party has risen.

    Deutsche Bank: Europe must cut a grand bargain with Italy

    EU budget battles are sometimes painted as clash between rule-making Northern members and rule-breaking Southerners.

    But the chief economist of Germany’s Deutsche bank argues that Europe should accept that austerity is not the answer. Instead, they should help Italy cut its massive €2 trillion debt mountain.

    Writing in the FT, David Folkerts-Landau, chief economist at Deutsche Bank, says Italy has actually been more disciplined than popularly thought:

    Contrary to widespread prejudice, Italy has been a frugal country. Its debt overhang is a legacy from before it entered the eurozone. Since then it has achieved a primary budget surplus (the excess of revenue over non-interest spending) almost every year.

    By comparison, all other eurozone countries, with the exception of Germany, have racked up cumulative primary deficits. Italy’s new debt since 2000 has been used to pay interest; it has not financed spending. Plus, the country has also achieved a current account surplus in recent years.

    So what’s the solution? Folkerts-Landau argues that Europe must reduce Italy’s debt servicing costs, creating space for targeted spending. To achieve that, the EC’s bailout fund (the European Stability Mechanism) would have to get involved by helping Italy buyback some debt.

    Interest on the ESM loan would be payable when Italy’s economy had achieved higher productivity and growth.

    It’s an interesting idea --- but it would involve Brussels putting a lot of trust in Rome -- at a time when euroscepticism is rising.

    More here....

    European stock markets have opened higher, amid hopes that Rome and Brussels could patch up their differences.

    The FTSE 100 is up 30 points, led by Vodafone (+7%) which is outlining cost-cutting plans this morning after posting an €7.8bn loss (partly due to writedowns).

    European stock markets
    European stock markets Photograph: MeetingRoom/Thomson Reuters

    Traders are shrugging off the big losses in Asia earlier today, after Wall Street’s wobble:

    Italy’s problems are compounded by the fact that its economy is slowing.

    There was no growth in the last quarter, forcing several economists to downgrade their forecasts. That gives Rome even less wriggle-room to raise spending without breaching deficit limits (set as a percentage of GDP).

    Italian minister: EC should help us

    Just in: An Italian government minister has predicted that Rome will not make many changes to its 2019 budget today.

    Lorenzo Fioramonti, a junior minister for the anti-establishment Five Star Movement, told CNBC that:

    “I don’t expect the Italian government to make any substantial revisions,”

    “I think there may be a dialogue around some potential second steps, but I think the bulk, the core of what’s being proposed will stay the same.”

    Fioramonti also argued that Brussels needs to rethink its whole approach to economic policy, and recognise that Italy needs help to escape its weak growth and high debt.

    “It is important that Europe comes to the realization that having a founding member in such a level of distress requires a collective effort to change.”

    Bloomberg also expects Italy to remain committed to its previous fiscal plans, despite the EC’s concerns.

    It says:

    In response to the European Commission’s request for a fresh budget from Italy, the most you can expect today from Rome is a few tweaks. With Finance Minister Giovanni Tria saying meeting the EU demand would be “suicide,” Italy is likely to stick to its guns.

    Deputy Premiers Luigi Di Maio and Matteo Salvini would rather risk a possible escalation of their spat with Brussels than go back on campaign promises.

    The agenda: Italy's budget battle and UK unemployment

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

    The battle over Italy’s budget plans is intensifying. Today is the deadline for Rome to submit a revised 2019 budget to the European Commission for approval -- and it’s not clear that the EC will be any more impressed than last time.

    Italy’s new government appears to be sticking to its principles, arguing that the country needs a new stimulus to boost its growth. That means more spending, and higher borrowing than the EU would like.

    The original plan forecast a deficit of 2.4% of GDP in 2019. That sparked Brussels’ disapproval, especially as EU officials suspect the growth forecasts underpinning the budget are too optimistic.

    If Italy doesn’t back down, it could potentially face EU sanctions. But its coalition of populist and anti-establishment parties remain committed to the spending and tax plans which won them power this year (and which Italian voters clearly want!).

    Paolo Pizzoli, senior economist at ING, suspects economy minister Giovanni Tria may make some small concessions to the EC, but perhaps nothing too significant.

    Pizzoli writes:

    We don’t expect the government to amend its 2.4% deficit/GDP target, often considered as the unmovable political standpoint. However, on the back of poor data releases, we believe the new draft might include less optimistic GDP projections and/or the inclusion of automatic spending cuts to ensure that the 2.4% target is an absolute maximum.

    This would be a small signal of flexibility towards softening the confrontational stance towards the EU, in an environment where the Italian government is being increasingly isolated within the EU Council.

    Also coming up today

    The latest UK unemployment figures may show the jobless rate remains at its lowest since the mid-1970s. Economists hope that wage growth (including bonuses) has picked up, to 3% from 2.7% last month.

    Jasper Lawler of London Capital Group says:

    Unemployment is expected to remain at current multi decade lows of just 4%. In the eyes of the market, the UK is at full employment. A slight tweak higher or lower is unlikely to have a big impact on the value of the pound. Therefore, dealers will focus on earnings data once again.

    Average weekly earnings are expected to increase to 3% in the three months to September, a significant jump from 2.7% the previous month. Weekly earnings excluding bonus are expected to remain constant at 3.1%. The strongest pace of the growth in a decade.

    Global stock markets are edgy, after Wall Street suffered a bad Monday. The Dow shedding 600 points last night, while Apple plunged by 5% after several key suppliers cut their own forecasts.

    This has already rocked Asia, where the Japanese stock market has lost 2% in a nervy sell-off.

    The agenda

    • 9.30am GMT: UK unemployment data
    • 10am GMT: ZEW survey of German economic sentiment

    Updated

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