European markets end higher
Helped by some positive economic news and a strong start on Wall Street - partly due to President Trump talking again about forthcoming tax reforms - European markets ended the day higher. The FTSE 100 was boosted by a weaker pound, with the dollar lifted by the prospect of higher interest rates after comments from Federal Reserve chair Janet Yellen in the last two days. Banks and mining companies were both among the main gainers. The final scores showed:
- The FTSE 100 finished up 33.85 points or 0.47% at 7302.41
- Germany’s Dax rose 0.19% to 11,793.93
- France’s Cac closed up 0.59% at 4924.86
- Spain’s Ibex ended up 0.78% at 9584.1
- But Italy’s FTSE MIB dipped 0.69% to 19,056.16
- In Greece the Athens market dropped 1.11% to 626.29
On Wall Street the Dow Jones Industrial Average is currently up 82 points or 0.4%.
On that note it is time to close for the day. Thanks for all your comments, and we’ll be back tomorrow.
EU's Moscovici upbeat after Greek meetings
Over in Greece, EU economic affairs commissioner Pierre Moscovici has completed a flying visit to Athens on an upbeat note saying the impasse between Greece and its creditors can soon be resolved. Helena Smith reports:
Emerging from a series of back-to-back meetings in Athens, the French commissioner expressed optimism that friction over the country’s latest bailout review would be resolved although the likelihood of that happening by February 20 when euro zone finance ministers next meet is almost impossible.
Following talks with prime minister Alexis Tsipras, Moscovici emphasized the need for Greeks “to see a light at the end of the austerity tunnel.” Earlier he had told reporters after a “very constructive” 30-minute meeting with finance minister Euclid Tsakalotos that Greece’s place was at the heart of the euro zone. ‘The fiscal targets can be met and overachieved… the will to go to a solution is there … and where there is a will there is a way.”
But despite the upbeat tone, Moscovici also insisted on the need for reform and said efforts were required “from all sides.”
That a compromise will come in the form of Greece accepting to implement additional austerity, however, is far from assured. Tsipras took to twitter to welcome Moscovici insisting that “the time has come to recognise all the sacrifices of the Greek people.”
“We can talk about reforms but enough with austerity,” he said, adding: “I am sure the European Commission will be an important partner in the alliance of logic that we need today in Europe.”
To break the impasse that has arisen over demands Athens adopts further austerity – in addition to the painful measures it has already enforced and committed to – insiders say the leftist-led government is holding out for a multi-layered compromise agreement. In exchange for €3.6bn worth of extra cuts (not least the lowering of the tax threshold) it wants guaranteed trade-offs such as a debt relief road map, the promise of participation in the ECB’s QE programme and a lower primary surplus target.
Yellen is asked that, if there is success in deporting all the undocumented immigrants, what would be the impact on economy.
Yellen says: Immigration has been an important part of labour force growth in the US for some time. One factor responsible for slowing growth is slower labour force growth and a radical change in immigration would certainly effect the potential of the economy to grow.
US markets continue to hold onto most of their gains following Trump’s tax and regulation comments. Neil Wilson, senior market analyst at ETX Capital, said:
Bang on cue, and no doubt with an eye to outshine Janet Yellen, Donald Trump offered a tantalising foretaste of planned tax reforms that sent the Dow soaring to new record highs.
The DJIA just bounced off 20,604 level after the president said he will greatly reduce taxes. Markets are taking this as the fodder they need for a fresh pop higher. He was short on details but based on what we’ve seen so far from this radical president there is no reason to think that the tax plans will be anything less than a major shift in US fiscal policy. Major pro-business tax reform has been on the cards but today’s comments reiterate the president’s intentions.
Asked about border adjustment tax and its effect on the economy, Yellen says I don’t think its appropriate for me to weigh in on specifics on this policy.
On regulation, Yellen says the Fed is concerned about regulatory burden and if that was not clear she wants to clarify it. (There has been a lot of talk about Dodd Frank and the regulations which were put in place to try and improve the banking system after the financial crisis, with some senators calling for their removal a la Trump and some saying they have protected investors. Yellen is not keen on rolling back on Dodd Frank but clearly feels the need to avoid being seen as putting unnecessary burdens on business.)
Back with Yellen and she is asked about her potential relationship with the new Treasury secretary, the ex-Goldman Sachs banker Steven Mnuchin.
She says she looks forward to a strong working relationship with Mnuchin.
US markets seem to be reacting more to Trump than Yellen:
Trump says he will greatly reduce taxes - the Dow responds... pic.twitter.com/Zgkd2ijc6U
— Neil Wilson (@neilwilson_etx) February 15, 2017
Senator McHenry, who wrote to Yellen calling on the Fed to halt talks over international agreements about banking regulations until President Donald Trump has a chance to review their work and replace top negotiators, repeats his question.
Yellen: Nothing is a rule that is effective in US until regulatory agencies have gone through the normal rule making process. Nothing binds the Fed to carry out agreements in our our rule making in US. In some cases we don’t agree with the outcomes and have no intention of putting [them] in place.
He asks if the Fed will wait for the new regulators to be in place, and takes from Yellen’s reply that the answer is no.
Back with Yellen, and the questions seem more directly political and partisan than a day earlier, with some interruptions when the Fed chair is answering:
The rudeness of ill-informed members of the House Financial Services Committee is always amazing during Fed chair testimony.
— Michael McKee (@mckonomy) February 15, 2017
Meanwhile President Trump is talking again about chopping regulations and his tax reforms:
US Pres. Trump: Cutting Regulations, ‘Massive Amounts’
— Livesquawk (@Livesquawk) February 15, 2017
US Pres. Trump: Tax Reforms To Be Ready In ‘Not Too Distant Future’
— Livesquawk (@Livesquawk) February 15, 2017
Away from Yellen, and US crude stocks rose by more than expected last week, as did gasoline inventories.
Crude stocks rose by 9.5m barrels compared to analyst forecasts of a 3.5m increase. Gasoline inventories rose by 2.8m barrels, better than the 752,000 drop expected.
After various comments and questions on Dodd Frank as per Tuesday, next up is Senator Barr who asks what the “serial failure of the Fed’s forecasts on the economy” tells us about the Fed’s policy.
Yellen says the Fed focuses on maximising unemployment not economic growth. Economic growth is disappointing but unemployment has come down substantially. We are close to meeting our labour market goals.
The reason [for the growth performance] is that productivity growth in the US economy has been disappointing. (Much as she said on Tuesday)
Updated
Janet Yellen has begun her second day of testimony, and is giving the same opening remarks as on Tuesday, pointing to a US rate hike before long.
Updated
Wall Street in mixed opening
With US inflation and retail sales pointing to an interest rate rise - which could dampen earnings at American companies - investors are playing it cautiously at the start of US trading and ahead of Janet Yellen’s latest testimony.
The Dow Jones Industrial Average is currently up 20 points or 0.1% but the S&P 500 opened 0.09% lower and the Nasdaq Composite dipped 0.07%.
More US data, showing industrial production unexpectedly fell in January.
Warm weather meant a drop in output from utilities, offsetting rises in manufacturing and mining. So the Federal Reserve’s industrial production index dipped 0.3% compared to expectations that it would remain flat. In December the index showed a rise of 0.6%, itself marked down from an initial reading of 0.8%.
#UnitedStates Industrial Production month-on-month at -0.3% https://t.co/if5ZbL1j2Y pic.twitter.com/2KnQBf9JkL
— Trading Economics (@tEconomics) February 15, 2017
(The above shows the December figure before the revision)
A reminder that Fed chair Janet Yellen will be up before the financial services committee of the House of Representatives in just under an hour’s time.
Rob Carnell at ING Bank reckons the figures mean the Fed is now more likely to raise rates at its next meeting in March:
Whilst headline inflation gains can be put down to the impact of helpful base effects, the rise in the core rate, coupled with a better trend in wages growth, sends a clear message that the US economy is now running a little hot, the labour market is tight, and the time for inaction and caution from the Fed is over.
Janet Yellen sounded a little more hawkish in her Senate testimony, and that got markets toying again with the idea of a March rate hike. But the data is now doing her work for her, and should push expectations further in this direction.
The conclusion we reach from the inflation data is supported also by activity data – in the form of a further strong retail sales figure...The probability of a March Fed hike implied from the Fed funds curve is 42%. We don’t need much more of a push for a March hike to become the market base case.
US inflation jumps: What the experts say
Here’s some instant reaction to the surge in the cost of living in America.
Paul Sirani, Chief Market Analyst at Xtrade.
“Today’s figures showed inflation climbed to a five-year high, with the US economy continuing to walk down the same path that led the Federal Reserve to raise interest rates in December.
“Under the current levels of inflationary pressure, all eyes will be on Fed Chair Janet Yellen, with investors pencilling in March for the first rate hike of a possible three.
“However, uncertainty continues to plague the political landscape, and Yellen will seek further clarity of President Trump’s policies before making a decision when they convene next month.”
The dollar is on a tear:
— Jamie McGeever (@ReutersJamie) February 15, 2017
-Best day in a month
-5-week high
-On its longest winning streak in 5 years (up for 11 days in a row) pic.twitter.com/b8opyoaFtB
Federal Reserve chair Janet Yellen suggested on Tuesday that interest rate rises would be “appropriate” if the US economy carries on as expected, and this new data can only confirm that belief.
(Yellen is due to give the second part of her testimony later but it is likely to be much the same as the previous session.)
Dennis de Jong, managing director at UFX.com, said:
Fed Chair Janet Yellen has indicated that interest rate rises are very much in her plans for the US economy in the year ahead, and today’s inflation data will only serve to underline her stance.
Inflation sailed past the Fed’s two per cent target and with economic growth expected to tighten, Yellen may well intervene on multiple occasions in the coming months.
The question many investors will be grappling with is when, and not if, rates rise.
Naeem Aslam, chief market analyst at Think Markets UK, said:
Yellen did not provide an explicit timeline in relation to interest rate hike and she is not going to do that today as well. Her job in these events is to manage the market expectations for any future interest rate... However, the CPI data released today has increased more pressure on her and she will be quizzed more intensively.
Having said that, we anticipate that the Fed will be able to fire another bullet during the next quarter (when it comes to the interest rate). Yes, sturdy growth and eroding slack in the jobs market are validating the Fed’s economic forecasts, but the wild card is still the Trump’s fiscal and tax plans. The Fed has removed the reference to transitory energy factors from their statement, and for us, it sends the signal that they are confident in achieving their mandate inflation target.
But there were some worse than expected outcomes in the day’s data:
Weakest point in US inflation data release: earnings. Real avg weekly earnings -0.4% in Jan vs. flat expected and +0.3% in Dec
— Ken Odeluga (@Ken_CityIndex) February 15, 2017
US inflation and retail sales smash forecasts
Boom! Two pieces of US economic data have just hit the wires and moved the markets.
The big news is that America’s inflation rate has hit a four-year high last month, jumping from 2.1% to 2.5%.
On a monthly basis, prices rose by 0.6% - twice as fast as expected - as households paid more for petrol (oh ok, gasoline) and food.
Retail sales have also smashed forecasts, growing by 0.4% last month - or 0.8% if you exclude automobile sales.
Huge US data
— Nicola Duke (@NicTrades) February 15, 2017
Retail sales and inflation both double expected
everyone at Fed watching ...
Investors are betting that this data puts more pressure on the US central bank to raise interest rates in March. That’s driven up the yield, or interest rates, on US 10-year government bonds.
Rates spike higher after inflation and retail sales data that beat expectations. https://t.co/JbW6qoagIZ pic.twitter.com/1J7JCd8Dg9
— Joe Weisenthal (@TheStalwart) February 15, 2017
The dollar is also surging, sending the pound reeling to just $1.238 - down almost a whole cent today.
But there is a fly in the soup -- average weekly earnings paid to US private workers fell by 0.4% in January. As in Britain, employees aren’t getting the full benefits of the recovery.....
US retail sales & inflation well above expectations, possibly putting March rate hike on table. BUT, earnings far worse than forecast, -0.4%
— Jamie McGeever (@ReutersJamie) February 15, 2017
Nick Macpherson, former top civil servant at the Treasury, makes an interesting point about today’s employment report -- there are now more job vacancies than people claiming jobless benefit.
Vacancies higher than claimant count for 1st time in 50 years. Reminder of labour market's flexibility & migration's role in lubricating it.
— Nick Macpherson (@nickmacpherson2) February 15, 2017
According to the ONS, there were 751,000 job vacancies for the 3 months to January 2017, while 745,000 people claimed unemployment related benefits in January.
The Wall Street Journal’s Mike Bird has helpfully plotted both sets of data for us:
No. of unemployment benefit claimants now lower than no. of job vacancies. Wasn't even true in '07 - @nickmacpherson2 says 1st time in 50yrs pic.twitter.com/P4HvPlzVtQ
— Mike Bird (@Birdyword) February 15, 2017
There is a caveat (as ever...). Advertising job vacancies is cheaper than in the past, thanks to the internet, so employees may be tempted to speculatively offer positions and see who applies.
But this could reinforce the point about Britain’s labour market approaching full capacity. But if that’s really true, why aren’t wages accelerating as workers flex their muscles and threaten to walk?
One argument is that there’s more slack in the system than the figures suggest (this is the Bank of England’s argument for not raising interest rates). Another is that the traditional relationship between pay and unemployment has broken down since the financial crisis - which doesn’t bode well for wage rises this year....
CBI: Wage growth is 'stubbornly sluggish'
The slowdown in real pay growth is causing concern in business, as well as in Westminster -- and prompting calls for government action.
Even the CBI, whose members are in a decent position to raise salaries among the ranks, are worried. Rachel Smith, their principal labour market economist, argues that productivity (a long-running problem in Britain) needs to improve.
And she singles out business rates as a big concern.
“Pay growth remains stubbornly sluggish, which is a concern given rising inflation. There are tentative signs that productivity is picking up, but there is further to go before it can underpin faster wage growth.
“Companies will be looking to the Budget to see adjustments to business rates along with measures to boost educational performance, helping firms to drive faster productivity growth.”
The rates paid by many businesses are going up sharply in the next few years, with the City of London facing a £1.4bn bill. That’s going to leave less money for pay rises.
Shadow work and pensions secretary Debbie Abrahams is also sounding the alarm on living standards:
“We welcome the overall increase in employment but are concerned that wide regional differences in the numbers of people in work remain.
“It is also worrying to see that rising living costs are quickly catching up with wage growth. If this trend continues, the Government’s abysmal record on living standards will get even worse.”
The Joseph Rowntree Foundation have seized on today’s wage figures to hammer home their warning that millions more people risk being dragged into poverty by rising inflation.
JRF says:
“Record employment in the economy is welcome and work has to be the best route out of poverty. But we know employment alone will not always help people reach a decent standard of living.
“Our analysis today shows four million more people over the last six years have fallen below a decent leaving standard, meaning they are struggling to make ends meet.
“Tackling the high cost of living is crucial to helping just managing families, particularly with a challenging outlook: inflation is likely to average 2.6% this year, in sharp contrast to the very low inflation of recent times.
“Government focus on modest incomes is welcome, but there is a fine margin between just managing today and poverty tomorrow.”
Read our respone to today's employment figures: We need to tackle the high cost of living to support #justmanaging https://t.co/ECtHUHHq5b pic.twitter.com/kYCv2vl1sQ
— Joseph Rowntree Fdn. (@jrf_uk) February 15, 2017
JRF’s report on the millions of ‘Just about managing’ families who don’t earn enough for a decent standard of living has caused quite a stir today.
It shows that some 30% of the population, or 19 million people, are living below the nationally-recognised minimum income standard (MIS) -- defined as having enough money to afford adequate housing, food and clothes.
Here’s our take:
And here’s Jo Michell, economics lecturer at Bristol Business School:
This doesn't tally with the 'inequality isn't getting worse' narrative. https://t.co/jzJB9zZCvq pic.twitter.com/VmC4b4p6Sj
— Jo Michell (@JoMicheII) February 15, 2017
Sam Tombs, economist at Pantheon, flags up that employment growth has slowed.
Lots of talk of a "resilient" lab market since the Brexit vote. Hard to square that with halving of jobs growth and Dec's 1.9% wage growth pic.twitter.com/0BQD2NGDs3
— Samuel Tombs (@samueltombs) February 15, 2017
As mentioned earlier, the UK created another 37,000 jobs in the last quarter. That’s the weakest performance since the second quarter of 2015.
This chart, from Eshe Nelson of Quartz, shows how real wage growth has slowed as inflation (in purple) catches up with earnings growth (in blue).
I have been obsessively watching this chart for months. Clearly a glutton for punishment. #paysqueeze #realwages #brexit pic.twitter.com/L8uUURAOsC
— Eshe Nelson (@eshelouise) February 15, 2017
Real wages are only growing if the blue line is above the purple one -- something that didn’t happen between 2010 and 2014.
There could be serious implications for the UK economy if inflation keeps biting into wages, taking real wage growth below today’s two-year low.
A real pay squeeze could hurt consumer spending, which has been driving growth since the EU referendum.
Andrew Sentance, senior economic advisor of PwC, explains:
With wage growth relatively subdued and consumer price inflation now up to 1.8% and set to rise further towards 3% by the end of 2017, the healthy real earnings growth we saw in 2015 and most of 2016 could soon be a thing of the past.
“This is likely to take the edge off consumer spending growth later this year and into 2018, which has been the main source of resilience in the UK economy since the Brexit vote.
Employment growth is slowing and real wages are being squeezed. Latest @PwC_UK comment on UK labour market data: https://t.co/BlJGIJciDb
— Andrew Sentance (@asentance) February 15, 2017
CIPD: Cracks appearing in UK labour market
Gerwyn Davies, Labour Market Adviser at the CIPD, the professional body for HR and people development, is concerned by the fall in real wage growth:
“The record number of people in employment is, of course, good news. However there are a number of underlying factors that remain problematic, for example the fall in real wage growth from 1.7% to 1.4% over the last three months. This is especially concerning given the prospect of rising inflation in 2017.
Davies is also struck by the drop in EU nationals working in Britain (see 9.57am post). It’s a sign that the EU referendum result is now having an impact on the economy, he agues:
“The figures also offer further evidence that Brexit has had a discernable impact on the allure of the UK as a place to live and work. The sharp growth in the number of non-UK nationals from the EU in work in the UK ground to a sudden halt in the second half of the year and has actually fallen in the last quarter.
“As a result, employers in sectors that employ relatively large numbers of EU nationals, which also account for a sizeable proportion of vacancies, are likely to come under further recruitment pressures if, as we expect, this trend continues. As our Labour Market Outlook showed, the demand for labour is likely to remain strong in the near-term, which is reflected by the high number of vacancies reported in this month’s figures.“
These charts from Resolution also show how real earnings growth has slowed....
Real pay growth dropped to 1.4% in December, its lowest level in almost two years. pic.twitter.com/mQ7ZOeuGz6
— ResolutionFoundation (@resfoundation) February 15, 2017
...and how the average worker has never reclaimed the pay growth lost in the financial crisis.
The pay growth slowdown comes with weekly earnings still £21 below their peak – pushing out the point of recovery still further. pic.twitter.com/5sPfxe2v0T
— ResolutionFoundation (@resfoundation) February 15, 2017
Resolution: Real pay growth will keep falling
The Resolution Foundation has bad news for UK workers -- they think the squeeze on wages will continue this year.
With inflation set to keep rising, real pay rises will be dragged below the 1.4% reported today.
Resolution’s latest pay projection show that real pay growth is set to fall to around 1 per cent next month, less than half the pre-crisis average of 2.2 per cent.
Laura Gardiner, Senior Policy Analyst at the Resolution Foundation, explains:
“Today’s figures show the jobs market remains robust, with employment reaching a new record high and inactivity starting to fall again.
“However, the encouraging news on jobs isn’t feeding through into earnings, which have shown no sign of responding to fast-rising inflation. Unless this changes Britain is set for a fresh pay squeeze later this year.
This chart shows their latest forecasts:
Professor Geraint Johnes, Director of Research at The Work Foundation – part of Lancaster University - also fears that wages are being squeezed by the rising cost of living.
He says:
The rate of price inflation may soon outstrip wage growth, putting a squeeze on wages. Indeed, the single month figure exceeds 2.5% only in construction.”
UK real wage growth hits two-year low
Today’s report also shows that real wage growth in the UK economy has now fallen to a two-year low, putting more pressure on households.
That’s because average earnings only rose by 2.6% in October-December, while inflation averaged 1.2% over the quarter (and has climbed to 1.8% in January!).
That means real wages, accounting for inflation, only rose by 1.4% in the last year.
The TUC is urging the government to take more action - including ending the pay squeeze on public sector workers.
TUC General Secretary Frances O’Grady says:
“With prices rising faster, real pay growth is now slowing down. This will be worrying for families whose have still not seen their living standards recover following the financial crisis.
“Next month’s Budget must set out a clear plan for preventing another fall in living standards. The Chancellor should tackle insecurity at work, invest in infrastructure and skills, and end the current pay restrictions on nurses, teachers and other key workers.”
Updated
This chart plots the UK unemployment rate over the last 45 years (in blue), and also the rates for men (yellow) and women (red)
It shows that the overall unemployment rate has dropped from 8.4% in 2011 to just 4.8% at the end of last year, the lowest since mid-2005 (not 2006 as I initially wrote earlier, sorry).
Here’s Work and Pensions Secretary Damian Green on today’s jobs report:
“With employment at its highest rate since records began, and unemployment at its lowest in over a decade, we remain in a position of strength.
“Our ongoing welfare reforms will continue to incentivise work and make sure the system is fair to all those who need it and those who pay for it.
With youth unemployment down, women in work at record levels and number of disabled people in work increasing too, we’re delivering on our pledge to build a country that works for everyone.”
The Department of Work and Pensions are tweeting some positive points from today’s jobs report:
New independent stats show the number of people in work has risen in every region and nation of the UK since 2010 pic.twitter.com/w2VWPrvWy5
— DWP Press Office (@dwppressoffice) February 15, 2017
Independent stats show that the number of disabled people in work is the highest since comparable records began in 2013 #DisabilityConfident pic.twitter.com/Ucu2lHgHwH
— DWP Press Office (@dwppressoffice) February 15, 2017
Employment is at a record rate of 74.6% with a record 31.84 million now in work. Read the news release here https://t.co/8N5CfPM3if pic.twitter.com/A5NqX0trOv
— DWP Press Office (@dwppressoffice) February 15, 2017
ONS: Non-UK nationals now make up 10.9% of workforce
Today’s jobs report also shows how the number of non-UK nationals working in Britain has grown over the last two decades, from almost 4% of the workforce to nearly 11%.
The ONS says that between October to December 2015 and October to December 2016:
- UK nationals working in the UK increased by 70,000 to 28.44 million
- non-UK nationals working in the UK increased by 233,000 to 3.48 million
And since October to December 1997....
- the number of non-UK nationals working in the UK increased from just over 1 million to 3.48 million
- the proportion of all people working in the UK accounted for by non-UK nationals increased from 3.8% to 10.9%
- this increase in non-UK nationals working in the UK reflects the admission of several new member states to the European Union (EU)
ONS: Treat migrant workers figures with caution
Today’s labour market report also shows a small drop in the number of EU workers in the UK, in the final three months of 2016.
Does that show that the Brexit vote is having an effect? Possibly....but we should be cautious here, as these figures aren’t seasonally adjusted.
The ONS says:
“The data on non-UK nationals and non-UK born workers is not seasonally adjusted, so the small drop in the number of workers born in other EU countries, and small rise in the number of non-EU-born workers should be treated with caution. These figures may be affected by seasonal patterns in employment.
“The first migration figures that include a post-referendum period will be published on 23 February, when ONS will release migration statistics for the year ended September 2016.”
With the employment total at a record high, and the unemployment rate at an 11-year low, Britain’s labour force appears to be approaching full capacity.
So argues ONS senior statistician David Freeman, anyway, who says:
“Continued moderate growth in employment has led to a new high in the total employment rate, while the rate for women has reached 70% for the first time on record. Overall, the labour market appears to be edging towards full capacity.
This chart shows how wages growth slowed in the last month:
Updated
Here’s a snapshot of the UK jobs report over the last year:
UK UNEMPLOYMENT REPORT RELEASED
BREAKING: Britain’s jobless rate remains at an 11-year low of 4.8% as firms keep hiring workers, but wage growth has slowed.
The labour report, just released, shows that:
Britain’s unemployment rate was 4.8% in the three months to December, remaining at its lowest level since 2005.
The number of people in work jumped by 37,000 in the three months to December, meaning there are now 31.84 million people in work - 302,000 more than for a year earlier. That’s a new record high.
The number of people out of work fell by 7,000 in the three months to December, taking the total down to 1.6 million.
But.... wages growth was weaker than expected. Average earnings excluding bonuses rose by 2.6% in the last quarter, down from 2.7% a month ago.
And including bonuses, earnings also rose by 2.6% - down from 2.8%.
Details and reaction to follow....
Updated
Joseph Rowntree: Millions living on inadequate incomes
The Joseph Rowntree Foundation has issued a chilling warning today that a third of people in Britain are living on inadequate incomes that don’t provide an adequate standard of living.
It’s a timely reminder that the unemployment rate, although important, doesn’t give a full view of the state of the UK economy.
An extra four million people have fallen into this bracket since 2008, according to JRF, because the cost of living has outpaced earnings since the financial crisis stuck.
JRF says:
- The number of individuals below the Minimum Income Standard (MIS) rose by four million, from 15 million to 19 million (from 25 to 30 per cent of the population).
- There are 11 million people living far short of MIS, up from 9.1 million, who have incomes below 75% of the standard and are at high risk of being in poverty.
- The remaining eight million fall short of the minimum, by a smaller amount, and despite having a more modest risk of poverty, are just about managing at best.
More than half of the households affected actually have at least one person in work -- but not being paid enough to provide a decent standard of living:
3m households below an adequate standard of living have someone in work, new @jrf_uk report finds: https://t.co/pEYhMSmUNh #justmanaging pic.twitter.com/6Ug8qQnn6T
— Joseph Rowntree Fdn. (@jrf_uk) February 15, 2017
JRF fears that many more people will be dragged into this situation, if wages don’t rise to keep pace with inflation:
And here’s Business Insider’s take:
Unemployment is no longer the most important number for measuring how well Brits are doing https://t.co/w71ttMojCY
— Oscar Williams-Grut (@OscarWGrut) February 15, 2017
Moscovici claims progress in Greek bailout talks
Over in Greece, commissioner Pierre Moscovici has claimed Athens and her creditors are making progress towards finally concluding its latest bailout review.
Moscovici struck an upbeat tone this morning, before a meeting with finance minister Euclid Tsakalotos.
He told reporters that:
“There is convergence at certain points so that we can conclude the review and move ahead. Some more small steps remain.”
Those ‘small steps’ involve the measures which Greece must take before its creditors are satisfied that it is meeting the terms of its bailout, and hand over €7bn in fresh loans.
Moscovici said Greece's talks with official lenders on concluding a bailout review have made progress but more steps needed to wrap it up
— George Goufas (@ggoufas) February 15, 2017
*MOSCOVICI: NEEDS STRONG GREECE AT THE HEART OF EUROPE - CONFIDENT CAN FIND SOLUTION FOR GREECE, PARTNERS
— Stavros Kallinos (@StKallinos) February 15, 2017
Moscovici has also tweeted that he’s picked up an award from Greece’s president this morning:
Extremely honoured to receive distinction from the
— Pierre Moscovici (@pierremoscovici) February 15, 2017
Hellenic President. I will always be a friend to #Greece. @Avramopoulos @EEAthina pic.twitter.com/hLZOKhjdkw
FTSE 250 hits record high as markets keep rising
European stocks are rallying (again) in early trading.
Investors are cheered by yesterday’s testimony by US central bank chief Janet Yellen, and her largely upbeat view of the American economy.
Britain’s FTSE 250 index of medium-sized companies has hit a fresh record high, up 0.2% to 18,825, and there are solid gains in Frankfurt and Paris:
Yellen’s hint that interest rates will rise soon is pushing bank shares higher, and her lack of anxiety over the US jobs market is also boosting confidence.
Traders also seem to be clinging to hopes that Donald Trump will provide an economic boost by cutting taxes and boosting infrastructure spending, rather than fretting about the unfolding scandal about links to Russia and the sudden departure of national security adviser Michael Flynn....
Updated
Today’s average earnings figures are particularly important, argues Connor Campbell of SpreadEx:
With inflation on the rise the most talked about figure this Wednesday will likely be the wage growth reading, which is set to remain unchanged at 2.8% [including bonuses]
That’s all well and good for now, but given that UK inflation could hit 3% at some point in the second half of 2017 growth needs to pick up to avoid severely pinched pockets across the country.
The agenda: UK unemployment report
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Britain’s jobs market is in the spotlight today, with the publication of new unemployment figures at 9.30am GMT.
The figures will be scrutinised for signs that the labour force is starting to suffer from last year’s Brexit vote. They’ll also show whether people’s pay is keeping up with inflation, which rose to 1.8% from 1.6% last month.
Economists expect a fairly solid set of figures, with the headline unemployment rate likely to remain unchanged at 4.8%, an 11-year low.
But the claimant count is tipped to rise by around 800 people in January, after dropping by 23,000 the previous month.
Average earnings, excluding bonuses, are expected to remain unchanged at 2.7% -- or 2.8% if you include bonuses.
Michael Hewson of CMC Markets explains why this matters:
With inflationary pressures starting to catch alight it is especially important that wages data keeps up, having been running ahead of inflation since mid-2014.
Kit Juckes of French bank Societe Generale suspects that the unemployment total may inch higher too....
A 5k increase in unemployment, and steady ex-bonus wage growth at 2.7% unlikely to move sterling, but soggy enough to keep a mildly bearish bias.
Also on today’s agenda...
Federal Reserve chair Janet Yellen will be heading back to Congress for a second day of testimony to US lawmakers, from 3pm GMT.
Yesterday she indicated that rate rises are coming, as it would be ‘unwise’ to wait too long.
European commissioner Pierre Moscovici is in Athens today, hoping to narrow the gap between Greece and her creditors over the long-stalled bailout review.
On the economic front, we get new US inflation figures at 1.30pm GMT. Economists predict that the CPI rose by 2.4% year-on-year in January, up from 2.1% in December - part of a wider trend of rising inflation.
Plus, beer group Heineken, dairy chain Danone and French bank Credit Agricole are all reporting results today.
Updated
