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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Pound jumps as UK unemployment falls to lowest since 1974, but basic pay lags inflation – as it happened

Inflation United Kingdom Darren Morgan Unemployment Office for National Statistics United States Andrew Bailey Bank of England CBI
Pedestrians in London, Britain.
Pedestrians in London, Britain. Photograph: Andy Rain/EPA

Closing post

Time to recap:

Soaring bonuses for City bankers and high signing-on fees for construction and IT professionals pushed Britons’ average annual pay up by 7% in March, but most workers suffered a fifth consecutive month of falling living standards.

Without bonus payments, workers were paid an average 4.2% wage increase in the three months to the end of March, well below the 7% inflation rate recorded in the same month.

The Office for National Statistics also reported that the UK’s unemployment rate dropped to the lowest since 1974, while competition for workers pushed up vacancies to record highs.

The news helped to push the pound up by one and a half cents against the US dollar, as traders anticipated the Bank of England was more likely to keep raising interest rates.

For the first time on record, there were more job vacancies than people unemployed - with more adults dropping out of the labour market with long-term sickness.

Darren Morgan, director of economic statistics at the ONS, says the UK labour market is a “mixed picture”.

“Total employment, while up on the quarter, remains below its pre-pandemic level.

“Since the start of the pandemic, around half a million more people have completely disengaged from the labour market.

“However, job vacancies are still rising, reaching yet another record high.”

Economists warned that the squeeze on regular pay would get worse in the coming months, with tomorrow’s CPI report expected to show inflation hit around 9% in April.

Public sector pay rose by just 1.6%, lagging far behind the private sector at 8.2%.

The data led to more calls for an emergency budget, but there’s still no fresh action from the government.

NIESR, the economic research institute, predicts that UK private sector pay will continue to outpace the public sector in the current quarter

Rising prices have forced a quarter of adults to skip meals, a survey has found, with two-thirds choosing to leave the heating off due to the jump in energy prices.

Leading children’s charity Action for Children warned that hard-up families are skipping meals, wearing coats indoors to stay warm, and living in the dark because they can’t afford to switch on the lights.

Soaring food inflation could force schools to choose between offering smaller portions at lunchtime and using cheaper ingredients, according to the boss of one of the UK’s largest food wholesalers.

And there is worse to come, with the chairman of M&S predicting food inflation could hit 10% this year.

Archie Norman also backed government plans to override parts of the Northern Ireland protocol, saying that some food exported south of the border now requires 700 pages of customs documents, partly written in Latin.

In the US, retail sales have risen again as consumers kept spending despite the squeeze of inflation.

WalMart, though, missed analyst estimates and cut its earnings forecasts as rising price pressures hits its margins and operating costs. It cited higher fuel prices and labour costs, along with supply chain problems.

Stock markets have rallied, as concerns over the global economy eased, with Shanghai outlining plans to end its lockdown in June.

In London, the FTSE 100 is up 50 points in late trading, +0.7%, while Wall Street opened higher.

Elon Musk’s takeover of Twitter is in fresh uncertainty, after he said the deal “cannot move forward” until the social media company proves that less than 5% of its users are fake or spam accounts.

Twitter, though, says it is committed to completing the deal “on the agreed price and terms as promptly as practicable”.

Land Securities has reported record office leasing in London as the lifting of Covid restrictions fuels a return of workers and a surge in demand for prime space, as the property company bounced back to profit last year.

A quarter of Britons say they’ve skipped meals due to rising cost of living

The cost-of-living squeeze in Britain has led to a quarter of adults skipping meals, a survey has found.

Polling group IPSOS also found that two-thirds have kept their heating off when they would normally have turned it on, while half (52%) are already going out socialising less than normal.

Among people on lower incomes, one in three people say they have missed meals recently because of the surge in inflation.

Ipsos also found that:

  • Those in the North East/Yorkshire and Humber and Greater London most likely to believe they will be hit harder by cost of living than other parts of the country.
  • Three-quarters say the UK Government is not doing enough to support the people through the crisis.

Gideon Skinner, Ipsos’s head of political research, said:

Concern about inflation is at a thirty-year high in Ipsos polling, and Britons across the country see the cost of living as both a national, local, and personal priority.

People are already telling us they have taken a range of actions to mitigate its effects – some with a direct impact on basics like food and heating – but given the economic forecasts there may well be more anxiety on the horizon.

This is going to maintain pressure on the Government to take more steps to help people through the cost of living crisis – already an area where they are less trusted than Labour, but this is an issue where even their own supporters want them to do more.

Updated

Wall Street opens higher as recession fears ease

The New York Stock Exchange (NYSE).
The New York Stock Exchange (NYSE). Photograph: Spencer Platt/Getty Images

Stocks have jumped in New York at the start of trading, as anxiety over the global economic outlook eases.

  • Dow Jones industrial average: up 326 points, or 1%, at 32,549
  • S&P 500: up 57 points or 1.44% at 4,065 points
  • Nasdaq Composite: up 260 points or 2.2% at 11,923

The rise in US retail sales last month has calmed concerns that America’s economy could be stumbling, while Home Depot’s (+3%) good results have cushioned the impact of Walmart (-8%) missing forecasts.

Worries about China’s slowdown have also dropped, after Shanghai set out plans for the return of more normal life from 1 June, ending the lockdown that has lasted more than six weeks and hit China’s economic activity.

US factories were also busier than expected last month.

Industrial output jumped by 1.1% in April, beating forecasts of 0.5% growth, including a 0.8% rise in manufacturing.

ING also predicts that the US economy will avoid recession, thanks to the ongoing rise in retail spending:

The US retail sales report for April is very solid and points to a willingness amongst households to run down accumulated savings to maintain lifestyles at a time when inflation is hurting real income growth.

It fully backs the case for a sharp recovery in GDP growth in the second quarter and a series of 50bp rate hikes from the Federal Reserve.

Fuel giants are under fresh pressure from Downing Street to pass on tax cuts to motorists as diesel prices hit a new high, PA Media reports.

Business Secretary Kwasi Kwarteng will write to the industry “to remind them of their responsibilities” following claims retailers hiked profits following the 5p per litre fuel duty cut in March’ss spring statement.

Figures from the Department for Business, Energy and Industrial Strategy show the average price of a litre of diesel at UK forecourts was 179.7p on Monday. That was up from 178.4p a week earlier.

The average price of petrol on Monday was 165.1p per litre. That was narrowly below the record of 165.4p set on March 21, based on the Government’s figures.

Separate fuel price statistics by data firm Experian Catalist using a different methodology show average prices on Monday were 180.3p per litre for diesel and 166.8p per litre for petrol.

Chancellor Rishi Sunak implemented a 5p per litre cut in fuel duty on March 23 to help cash-strapped motorists. But the RAC said retailers are taking an average profit of 2p per litre more than before the policy was introduced.

The firm’s analysis showed the average margin for a litre of petrol and diesel is currently 11p and 8p respectively. In the month up to the duty cut it was 9p for petrol and 6p for diesel.

The Prime Minister’s official spokesman said:

“The public rightly expect retailers and others in the supply chain to pass on the fuel duty cut at the forecourts. It’s the biggest cut ever on all fuel duty rates and can mean big savings for families.

“We know that a number of retailers - big supermarkets, Asda, Tesco and Sainsbury’s - are passing on the cuts and we will raise this with other petrol retailers.

“The Business Secretary will be writing to the industry again to remind them of their responsibilities here so they should be in no doubt about the need to make sure that everyone is passing on these cuts on the forecourt.”

Capital Economics: US recession fears look misplaced

The 0.9% jump in US retail sales in April, and the upward revision to March, should calm concerns that the US economy is close to recession, says Paul Ashworth of Capital Economics:

Never bet against the US consumer has always been a good adage to bear in mind throughout my 20-plus years in the markets.

Despite the surge in prices weighing on their purchasing power, the US consumer now appears to be single-handedly keeping the global economy afloat.

The big surprise is that, stripping out gas, autos and building materials, control group sales increased by 1.0% m/m in April (consensus 0.5%) and sales are now estimated to have increased by 1.1% in March (previously a 0.1% decline), Ashworth adds:

Given this show of strength from consumers, speculation that the US economy is in danger of an imminent plunge into recession look badly misplaced.

Together with the surprising strength of core CPI last month, this is another reason to expect the Fed to continue hiking rates by 50bp per meeting, despite the recent swoon in stock markets.

Updated

US retail sales jump as consumers keep spending amid high inflation

US consumers kept spending last month, despite economic uncertainty and rising interest rates, as inflation pushed up prices.

Spending at US retailers and food outlets rose 0.9% in April, and were 8.2% higher than in April 2021.

Excluding motor vehicles and gas stations, sales rose 1% during the month.

The figures aren’t adjusted for inflation, so they also reflect the jump in many prices.

Spending at gasoline stations were up 36.9% compare with April 2021, due to the jump in fuel costs in the last year. They dropped month-on-month, though, reflecting the easing in gas prices after crude oil spiked in March.

Takings at food services and drinking places were up 19.8% year-on-year.

Electronics & appliance store sales rose 1% in the month, but were 5.2% lower than a year ago.

Furniture sales were up 0.7% in the month, suggesting demand for merchandise remains resilient despite inflation surging to 40-year highs.

March’s retail sales were also revised up, to show 1.4% growth - twice the 0.7% first recorded.

Updated

NIESR, the economic research institute, predicts that UK private sector pay will continue to outpace the public sector in the current quarter.

Having analysed today’s jobs report, it says:

  • NIESR’s wage tracker predicts that average weekly earnings growth will grow at 6.1% in the second quarter of 2022, after increasing by 7.0% in the first quarter. The strong growth is underpinned by a combination of high bonus payments and increasing regular pay.

  • We maintain our AWE [average weekly earnings] forecast for total pay in the private-sector to grow at 6.7% in the second quarter of this year, with growth in regular pay expected to be slightly lower than in the first quarter of this year.

  • We expect public-sector total AWE growth to reach around 3 % in the second quarter of the year.

April’s inflation rate is expected to hit 9% tomorrow, so that would mean a very painful fall in real pay for the public sector.

Shares in power generation business ContourGlobal have jumped by a third today, after it became the latest London-listed firm to attract a takeover approach.

U.S. private company KKR has agreed to buy the power generation company for £1.75bn ($2.16 billion) in a bid to expand its renewable energy portfolio.

ContourGlobal, which operates 138 thermal and renewable power plants across Europe, Latin America, North America and Africa, will recommend that its shareholders accept the offer, KKR said.

Today’s ‘mixed’ jobs report adds to the dilemma facing the Bank of England, as growth slows and inflation climbs, says Craig Erlam, senior market analyst at OANDA:

The UK labour market report can be viewed as okay or bad depending on which way you look at it.

From a cost-of-living perspective, bonuses boosted average earnings to 7% and closed the gap between income and inflation which could ease some of the pressure on households across the country, albeit while still pointing to a squeeze on real incomes. Excluding bonuses, the data was a concern with earnings rising only 4.2% and falling well short of inflation, ramping up the pain for many.

From a central bank perspective, the data isn’t ideal, he adds:

Higher earnings may ease some pressure on households but, as Governor Bailey alluded to, they also contribute to the inflation spiral and makes their job of achieving price stability all the more difficult.

The spikes we’ve seen in UK yields and the pound this morning suggest markets are anticipating more rate hikes as a result, and at a time when a recession is already the base case.

Back in the markets, the pound is continuing to rally - now up 1.8 cents against the US dollar at almost $1.25.

Sterling is benefitting from the surprise drop in unemployment, and the rise in total wages (due to bonuses), which could spur the Bank of England on to keep raising interest rates.

Warren Venketas, analyst at DailyFX comments:

“The UK unemployment figures beat earlier this morning highlighted the strength of the UK labor market, adding to hawkish bets from the BoE.

Money markets have since added in a few extra basis points on to last weeks yearly cumulative figures but I believe markets are awaiting tomorrow’s inflation data for more clarity.

Last week’s UK growth figures were disappointing which plays against an aggressive BoE so inflation would need to come in hot tomorrow to sustain the upward GBP bias short-term. Medium/long-term, I will be looking for more economic data to see if the UK has reached its peak in terms of inflation and jobs which could dampen rate hike prospects leaving the pound susceptible to further downside.”

Also, the US dollar has dropped back from 20-year highs, as traders move back into riskier assets after recession fears hit markets.

Trade expert David Henig of the European Centre for International Political Economy think tank makes some good points about the Northern Ireland protocol, following M&S chair Archie Norman’s criticism of the EU’s approach:

As does the FT’s Chris Giles:

US grocery giant Walmart has reported quarterly earnings that missed Wall Street’s expectations by a wide margin, due to the rising costs of food and fuel, and supply chain problems.

CNBC has more details:

The company raised its outlook for sales this year, but lowered profit expectations. It said it expects net sales to increase about 4% in constant currency for the full year. It previously anticipated a 3% increase.

But it said earnings per share for the year will decrease by about 1% compared with the mid single-digit increase it previously expected.

In an interview with CNBC, Chief Financial Officer Brett Biggs said the significant jump in fuel prices, higher labor costs and aggressive inventory levels weighed on the company.

He said some merchandise arrived late and other items, such as grills, plants and pool chemicals, didn’t sell due to “unseasonably cool weather in the U.S.”

Shares in Walmart are down 6% in pre-market trading, while home improvement retailer, Home Depot, has beaten forecasts with a 3.8% rise in net sales.

Updated

Twitter says it is committed to completing Elon Musk’s takeover “on the agreed price and terms as promptly as practicable”.

The social media company has filed its preliminary proxy statement with the U.S. Securities and Exchange Commission on the deal, which Musk today said can’t proceed without proof about the number of fake or spam accounts.

Twitter says:

Twitter is committed to completing the transaction on the agreed price and terms as promptly as practicable.

The preliminary proxy statement contains important information including the background of, and reasons for, Twitter’s transaction with Mr. Musk.

The transaction is subject to the approval of Twitter stockholders, the receipt of applicable regulatory approvals and the satisfaction of other customary closing conditions, and is expected to close in 2022.

The filing points out that the deal includes Twitter’s “specific enforcement rights” to require Musk to perform the obligations under the merger agreement and consummate the closing on the terms set forth in the merger agreement.

The proposed takeover also includes a $1 billion breakup fee for each party, which Musk will have to pay if he ends the deal or fails to deliver the acquisition funding as promised.

The filing shows that on April 5, Musk contacted Twitter co-founder Jack Dorsey to ask his perspectives on Twitter in connection with the announcement of Musk joining the Twitter Board (which he later declined, before launching his bid).

As part of this discussion, Mr. Dorsey shared his personal view that Twitter would be better able to focus on execution as a private company. Mr. Musk further inquired if Mr. Dorsey would stay on the Twitter Board, and Mr. Dorsey declined.

It also highlights that Goldman Sachs and JP Morgan said the $54.20 offer was fair.

Therefore...

The Twitter Board unanimously:
(1) determined that the merger agreement is advisable and the merger and the other transactions contemplated by the merger agreement are fair to, advisable and in the best interests of Twitter and its stockholders; and (2) adopted and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement.

Kremlin says G7 using Russia's reserves for Ukraine would be 'outright theft'

The Kremlin has said it would be “outright theft” for the Group of Seven economic powers and European Union to enable Ukraine to use Russia’s frozen reserves, Reuters reports.

The Kremin called such a move illegal and one that would demand an appropriate response.

German finance minister Christian Lindner told four European newspapers that he was open to the idea of seizing Russian state assets to finance the reconstruction of Ukraine and that proposals to that effect were already being discussed among the G7 and in the EU.

Roughly $300bn of Russian foreign exchange reserves were frozen when the EU, the US and their allies imposed sanctions on the country’s central bank after the Ukraine war began.

Last week Josep Borrell, the EU’s high representative for foreign policy, said EU capitals should consider seizing those frozen reserves to cover the costs of rebuilding Ukraine after the war.

The cost of rebuilding Ukraine could surpass half a trillion dollars. A leaked EU reconstruction plan showed that Ukraine could receive loans, grants and possibly the proceeds of seized Russian oligarch property to help pay the cost.

In the plan drafted in Brussels, the European Commission states that the Ukrainian government will have to take out loans to pay for rebuilding its war-ravaged country. Non-repayable grants from EU member states would provide another tranche of the funds needed to rebuild destroyed homes, schools, roads, railways, airports and bridges.

More here, by my colleague Jennifer Rankin:

In the property world, Land Securitires has returned to profit as people return to offices and shops after the Covid-19 lockdowns.

Landsec, the commercial property developer and investment company, made a pre-tax profit of £875m in the year to 31st March, compared with a loss of almost £1.4bn a year before.

The recovery was driven by a 12% rise in the value of Landsec’s portfolio of shops and offices, from £10.7bn to £12bn, as people returned to workplaces, restaurants, bars and retail sites.

Mark Allan, chief executive of Landsec, says:

“Landsec has delivered strong operational and financial results despite the turbulence within the UK economy.

The actions we have taken, driven by our strategic focus on three distinct areas have resulted in record leasing in our London office portfolio, a return to growth in our major retail destinations and clear, substantive progress in growing our mixed-use urban neighbourhood portfolio.

We continue to recycle capital out of mature assets, whilst our pipeline now offers the opportunity to invest £3bn in sustainable London offices and mixed-use development over the next five years at attractive returns.

The company is looking to Manchester for growth. Last year Landsec took a 75% stake in Media City, the 15-hectare (37-acre) media, digital and tech hub in Salford, and also bought urban regeneration developer U+I, which has operations in Manchester.

Updated

Inflation could force schools to cut meal portions or quality

Soaring food inflation could force schools to choose between offering smaller portions at lunchtime and using cheaper ingredients, according to the boss of one of the UK’s largest food wholesalers.

Andrew Selley, the chief executive of Bidfood, a food distribution business with an annual turnover of nearly £2bn, said schools would be facing tough decisions unless the government increased funding for free school meals.

Selley said shortages caused by the war in Ukraine had led to a doubling in the price of sunflower oil compared with a year ago, with knock-on effects on other vegetable oils.

Baked goods are 20% to 30% dearer, and the increase in wheat prices will also feed through into pasta, egg and chicken prices, as wheat is used as chicken feed, he said.

Selley said the amount of money provided by the government for free school meals had gone up by only 1.7% over the past 10 years, which was well behind food inflation even before the sharp increases seen in recent months. More details here.

Eurozone economy stronger than first thought

Euro zone economic growth was stronger than previously expected in the first quarter, according to revised data released this morning.

The European Union’s statistics office Eurostat said eurozone GDP rose by 0.3% in January-March. That’s better than the 0.2% first estimated, and matches the growth at the end of 2021.

That growth rate is still slower than the UK, where GDP rose by 0.8% despite a small fall in March, but better than the US where the economy shrank by 0.4% in Q1.

European growth in the first quarter was hit by Russian invasion of Ukraine on February 24, which led to a surge in energy prices, disrupted supply chains, and hurt business and consumer confidence.

But eurozone employment continued to rise in January-March -- up 0.5% quarter on quarter and 2.6% year-on-year.

Yesterday, the EC cut its growth forecast for the euro area, due to the impact of the Ukraine war.

Here’s the latest on the Twitter takeover....

Walid Koudmani, chief market analyst at financial brokerage XTB, says:

“The latest comments from Elon Musk have heightened tensions surrounding his $44bn buyout deal for the social media company. This is either a negotiating tactic from Musk to seek a much lower price or he is laying the grounds to walk away.

It’s a risky game because this is all happening in the public sphere and to that degree, this has the potential to turn quite volatile. It does appear less and less likely that a deal at $44bn will happen and with the share price trading at a discount to the offer level, it would appear investors agree.”

Updated

Full story: UK pay hit by inflation but unemployment falls to 48-year low

Soaring bonuses for City bankers and high signing-on fees for construction and IT professionals pushed Britons’ average annual pay up by 7% in March, but most workers suffered a fifth consecutive month of falling living standards.

Without bonus payments, workers were paid an average 4.2% wage increase in the three months to March, well below the 7% inflation rate recorded in the same month, according to the Office for National Statistics.

Analysts said the UK was suffering a chronic shortage of workers after about 500,000 quit the labour market during the Covid-19 pandemic and many continental European workers left Britain following Brexit. The unemployment rate fell to 3.7%, the lowest since 1974.

Paul Dales, the chief City economist at the consultancy Capital Economics, said:

“Anecdotal evidence suggests that businesses have been raising bonuses to maintain staff, so it is probably another sign of how the tight labour market is feeding into faster wage growth.”

Illustrating the widening gap between the number of staff employers need and those seeking work or to move job, vacancies rose to a record of 1,295,000 in the three months between February and April – an increase of 33,700 from the previous quarter and a jump of almost 500,000 since March 2020.

Here’s the full story:

This chart from Simon French at Panmure Gordon shows the rise in people leaving the jobs market with long-term sickness (as highlighted earlier).

In the City, shares have hit its highest level in over a week.

The FTSE 100 share index is up 50 points, or 0.66%, at 7514 points, even thoug the strong pound is holding back exporters.

European markets are showing stronger gains, with France’s CAC and Germany’s DAX up 1.3% each.

Bloomberg says optimism that China will ease its corporate crackdown and Covid lockdown is outweighing worries about the economic outlook:

Fueling the risk-on mood even further, Shanghai is tentatively unraveling a punishing lockdown, while Chinese tech stocks jumped on optimism that a meeting between the nation’s top regulators and corporate giants would result in Beijing dialing back its yearlong clampdown on the industry.

Pound jumps

In the financial markets, sterling is strengthening against major currencies after UK unemployment rate fell unexpectedly to a 48-year low of 3.7%.

The pound is up 1.5 cents against the US dollar to $1.247, its highest level since tumbling almost two weeks ago when the Bank of England slashed its growth forecasts.

Sterling is up a cent against the euro too, at €1.19.

Ricardo Evangelista, senior analyst at ActivTrades, says traders are expecting further UK interest rate rises, with inflation forecast to have hit 9% in April.

Sterling is benefiting from surprisingly positive data released this Tuesday morning, with unemployment and wage figures both surpassing expectations, painting a more positive picture for the British economy than had been expected.

Against such background, expectations have risen for the Bank of England to step-up the pace of monetary policy tightening; with inflation data being released tomorrow predicted to surpass 9%, officials at the BoE should have little choice but to continue to rise interest rates, creating scope for further pound gains.

Musk: spam account doubts could scuttle Twitter deal

Elon Musk’s deal to buy Twitter is looking increasingly troubled.

The billionaire has tweeted that the deal, agreed last month, ‘cannot go forward’ unless company can show that less than 5% of accounts are fake or spam.

Yesterday, Musk suggested that he could seek to pay a lower price for Twitter, as he expressed further concerns about the presence of fake accounts on the platform.

The Tesla CEO said reducing his agreed $54.20 per share offer wouldn’t be “out of the question”, days after putting the $44bn ($36bn) deal “on hold” after he queried the number of spam accounts on Twitter.

Musk told the All-In Summit in Miami that the deal going through depended on Twitter’s response to his concerns about fake accounts.

“It really depends on a lot of factors here,” he said in comments reported by the Financial Times.

“I’m still waiting for some sort of logical explanation for the number of sort of fake or spam accounts on Twitter. And Twitter is refusing to tell us. This seems like a strange thing.”

Musk also failed to distinguish himself with an exchange with Twitter CEO Parag Agrawal over spam on the platform:

Twitter’s share price fell 8% yesterday, to $37.39, back to levels before Musk revealed he has build a stake in the company, and then launched his $54.20 per share offer.

They’re down another 1.7% today in premarket trading at $36.70, as traders conclude the deal is very unlikely to happen at the original price, or possibly at all.

Updated

Economic inactivity worryingly high

Today’s jobs report shows that there are around 460,000 more people ‘economically inactive’ than before the pandemic -- neither in work, nor looking for a job.

The total economically inactive rose by by 65,000 in January-March, to 8.829m.

Economic inactivity in the UK
Economic inactivity in the UK Photograph: ONS

As this chart shows, there has been a rise in long-term sickness, as well as in people leaving the jobs market to care for family:

UK economic inactivity
UK economic inactivity Photograph: ONS

Many of those are over 50s, as Emily Andrews, Deputy Director for Work at the Centre for Ageing Better, explains:

“The UK workforce participation crisis is continuing – driven by older workers leaving the labour market. There are 246,000 fewer people aged 50-64 participating in the workforce than there were at the start of the pandemic.

“This means there could be up to a quarter of a million older workers out of employment earlier than they had planned, potentially impacting their retirement plans, while companies are missing out on the positive impact older workers can bring.

Tony Wilson, director of the Institute for Employment Studies, says there is a recruitment crisis:

“There’s some good news in today’s figures, with record pay growth in the private sector just about keeping wages ahead of inflation, and unemployment continuing to fall to its lowest since 1974. However this is masking now the tightest labour market that we have seen in at least half a century, with more vacancies than there are unemployed people for the first time ever, and well over a million fewer people in the labour force than on pre-pandemic trends.

It’s this recruitment crisis that is fuelling higher private sector pay and bonuses and is also behind recent rises in interest rates. However rather than trying to dampen demand, we need to be doing far more to boost labour supply, which would support economic growth, raise household incomes and help contain inflation. In fact if anything, we’re cutting investment in employment support at just the time that we should be ramping it up.

Back on the UK jobs report, and Resolution Foundation’s Torsten Bell points out that real regular pay is falling at the fastest pace in a decade, in the tightest jobs market on record:

Norman: Food price inflation could hit 10% this year

M&S chairman Archie Norman also warned that food price inflation in Britain could hit 10% this year.

He told Radio 4’s Today programme that global prices are rising, such as wheat and freight costs, oil and energy, so all retailers will “reluctantly” have to lift their prices.

But will it be an ‘apocalyptic’ extent, as Bank of England governor Andrew Bailey warned yesterday?

Norman says he wouldn’t use that term -- but concedes it will be a tough time for consumers.

“I think you have to keep it in context, wages have been rising quite well in the UK, we’ve given all our people over 5% wage increase this year.

It will be “very negative for consumer discretionary income”, but not apocalyptic, at least not for M&S’s customers, Norman adds.

“It wouldn’t be surprising to see food price inflation over the course of the year running towards 8-10%.”

“But we don’t know that yet because it runs through the year, some has gone through now but quite a lot’s still to come.”

M&S chair: UK NI's protocol approach a 'triumph of common sense'

The chairman of Marks & Spencer has backed the British government’s efforts to make changes to the Northern Ireland protocol.

Archie Norman told the Today Programme that M&S is in the front line of the problem at the UK border since Brexit, which is adding to its costs and creating much more paperwork.

It has to close its French business because of customs rules, and it is proving very tough to make its business in the Republic of Ireland work, he says.

Norman explains the new frictions at the borders, following Brexit. At the moment, M&S wagons arriving in the Republic have to carry 700 pages of documentation covering the items on board, which takes eight hours to prepare. Some of the descriptors, particularly of animal products, have to be written in Latin, and in a certain typeface, Norman says.

M&S employs 13 vets in Motherwell to prepare it all, and it pushes up driver time by 30% -- meaning it all costs around £30m.

Currently, there’s an easement in Northern Ireland, so the controls aren’t the same. But the EU are looking for comparable controls to be introduced.

Were that to happen, Norman says, “quite a lot of products” wouldn’t get to Northern Ireland, and what did get in would be very expensive.

Marks & Spencer is a big company, we can make almost anything work, however bureaucratic, but for the small artisan cheesemaker or cake-baker, and so on, it would simply be impossible to export any more.

Right now, Norman says, it is managing to supply Northern Ireland without a shortfall, although it costs more money. The paperwork for Northern Ireland takes one hour, compared with eight for Dublin.

Norman (a former Conservative MP) argues that tougher safety checks on shipments to Northern Ireland aren’t needed, as UK food standards by law, are “equivalent or higher” than in the EU.

The Commission want every product from Great Britain going into Northern Ireland to be labelled as being meant for UK consumption only -- that would cost M&S £9m per year, Norman says, and be impossible for small producers.

Q: Do you think, why on earth did the UK sign up to this?

Norman argues that EU is obsessed with the letter of the rules, while the UK looks at the the purpose of the rules.

Q: So should the UK try and agree a shorter, time-limited deal?

Norman suggests that train has ‘left the station’, and the priority now is to solve the problem on Northern Ireland, so its people get the food they deserve and require.

What the British government is proposing at the moment seems to me a triumph of common sense over rules-based mentality, and will make sure that at a time of inflation the Northern Irish people can get the fresh foods that they’re used to, and entitled to.

Resolution: Britain’s wage squeeze is going to get far worse

Soaring inflation means the wage squeeze is going to get ‘far worse’, even though some firms are paying bonuses to attract or hold onto staff in a tight labour market.

So warns Hannah Slaughter, senior economist at the Resolution Foundation, said:

“The UK labour market continues to tighten, with the number of unemployed people having fallen below the number of job vacancies for the first time ever. People are taking advantage of these conditions to move jobs, and employers are responding by paying bonuses to hire or retain key staff.

“But for the vast majority of the workforce, the labour market may feel far less hot. There is little sign of wider pay pressures building and real wages are getting squeezed even tighter.

“With inflation having shot up in recent months, the scale of Britain’s wage squeeze is going to get far worse.”

Jonathan Boys, labour market economist for the CIPD, the professional body for HR and people development, is struck by the wide gap between public and private sector pay growth.

As the earnings data show, the squeeze is hitting some harder than others. The difference between total pay growth in the private and public sectors – 8.2% and 1.6% respectively – is stark.

Further help from government is inevitable and this should be targeted where need is greatest.

The drop in the unemployment rate to 3.7%, and the record vacancies, shows firms are strugging to hire workers, says the Institute of Directors.

Kitty Ussher, chief economist at the IoD, said:

“The unemployment rate is now lower than at any time since the early 1970s. Combined with half a million more vacancies in the economy than before the pandemic, there are plenty of job opportunities for people who are looking for them.

“This is good news for households but it causes difficulties for businesses trying to retain staff and recruit for the right skills: our surveys show a massive 42% of firms citing ‘skills shortages’ as having a negative impact on their organisation. This morning’s data puts the onus on government to prioritise workplace skills policy, to ensure firms have access to the talent they need.”

Labour are also calling for an emergency budget.

Jonathan Ashworth MP, Labour’s Shadow Secretary of State for Work and Pensions, says:

“Real wages have now fallen to almost £300 lower than they were 15 years ago.

“Alongside a decade of the Conservatives’ failure to grow the economy, their punishing tax rises, surging inflation and real terms cut to support mean people across the country are facing a cost of living tsunami.

“By refusing to take action on the cost of living through an emergency budget, Rishi Sunak has shown once again the Tories simply aren’t on the side of working people.”

More calls for emergency budget

There are fresh calls for an emergency budget to help workers, after basic pay fell further behind inflation.

TUC General Secretary Frances O’Grady says millions of working families are at breaking point:

“The government is missing in action at the worst possible time.

“Ministers must stop dithering and come back to parliament with an Emergency Budget.

“We urgently need a windfall tax on oil and gas companies to help fund energy grants for struggling households.

“And we need a proper boost to Universal Credit and the minimum wage to get money back into people’s pockets, and to inject much-needed demand into our economy.”

Ben Harrison, Director of the Work Foundation think tank at Lancaster University, says the government should help the poorest families, by uprating benefits in line with the surge in inflation.

“Despite employment continuing to rise, today’s figures underline the challenges facing workers who are seeing inflation eat away at their living standards.

With regular pay at 4.2% (excluding bonuses) being outpaced by rising inflation at 7% - and the Bank of England warning of a recession and that inflation could rise to 10% - workers in low-paid and insecure employment are facing huge uncertainty and tough choices as the cost of living crisis bites.

“For weeks the Government has hinted at extra help to come, yet all workers will have heard this week is that they are not to ask for pay rises and that if they’re struggling they simply need to work more hours or get a better paid job.

“It is vital that we see targeted support delivered now via an Emergency Budget. As a priority, the Government must find a way to uprate benefits in line with inflation – or introduce measures to the same effect – to provide more security to those most in need.”

Chancellor of the Exchequer, Rishi Sunak, says he knows it’s an anxious time -- but still hasn’t announced any fresh help with the cost of living squeeze.

Sunak says:

“The unprecedented support we provided through our Plan for Jobs has led to the jobs market remaining robust despite global challenges, with the unemployment rate near record-lows and the number of payrolled employees at a record high.

“I understand that these are anxious times for people, but it’s reassuring that fewer people are out of work than was previously feared, and we are helping them to keep more of their hard-earned money through tax cuts, changes to Universal Credit and support with household bills worth £22 billion this financial year.”

But groups from charities to the CBI insist that more help is needed.

Action for Children, for example, has warned this morning that strugging families are skipping meals, wearing coats indoors to stay warm, and living in the dark because they can’t afford energy bills.

In one case, it said, a boy it worked with had been off school with sore feet caused by chilblains:

ONS: underlying regular earnings falling sharply in real terms

Darren Morgan, director of economic statistics at the Office for National Statistics (ONS), says the UK labour market is a “mixed picture”.

Although unemployment has dropped, underlying regular earnings are “now falling sharply in real terms.” (ie, after inflation).

The number of UK workers on payrolls continues to hit new highs, rising by 121,000 between March and April to 29.5 million.

BUT.... there are still more than half a million fewer people in employment than before the pandemic, at 32.569m people (up 83,000 in the last quarter).

Total job-to-job moves increased to a record high of 994,000 in January-March, today’s jobs report says, “driven by resignations rather than dismissals”.

ONS: More vacancies than people unemployed

For the first time since records began, there are fewer unemployed people than job vacancies, says the ONS.

While the unemployment rate dropped to 3.7%, the lowest since 1974, the number of job vacancies in February to April 2022 rose to a new record of 1,295,000.

That’s 33,700 more than in the previous quarter and an increase of 499,300 from the pre-coronavirus (COVID-19) pandemic level in January to March 2020.

The ONS says:

In January to March 2022 the ratio of unemployed people to every vacancy remained at 1.0 however, for the first time, the number of vacancies was larger than the number of people unemployed.

That could encourage the Bank of England to keep raising interest rates in the coming months, to prevent a wage-price spiral:

Introduction: Regular pay lagging behind inflation

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

Regular pay in the UK continues to lag behind inflation, as workers - particularly in the public sector - are hit by the cost of living squeeze, even as the unemployment rate hits the lowest since 1974.

Figures just released by the Office for National Statistics show that regular pay (excluding bonuses) rose by 4.2% per year in the three months to March.

That means basic pay shrank in real terms, as CPI inflation hit 7% in March, and may have soared over 9% in April.

But total pay was stronger up - up 7% per year, with bonuses swelling some pay packets.

The Office for National Statistics reports that:

In real terms (adjusted for inflation) in January to March 2022, growth in total pay was 1.4% and regular pay fell on the year at negative 1.2%.

Today’s labour market report also shows a stark difference between workers in the public and private sector.

Average total pay growth for the private sector was 8.2%, but just 1.6% for the public sector.

The finance and business services sector showed the largest growth rate (10.7%), partly because of strong bonus payments, the ONS says.

The jobs report also shows that the UK’s unemployment rate dropped from 3.8% to 3.7% -- the lowest since 1974.

The UK’s employment rate increased by 0.1 percentage points on the quarter to 75.7%, while the number of job vacancies remained at a record high.

The data comes a day after Bank of England governor Andrew Bailey reiterated his call for workers to show restraint on wage rises, particularly the better paid.

Bailey told MPs:

“I do think people, particularly people who are on higher earnings, should think and reflect on asking for high wage increases.

It’s a societal question. But I am not preaching about this. It’s not for me to go around telling people what to do.

Unions hit back at Bailey, with Unite saying he should not “lecture” workers about wage restraint.

TUC Deputy General Secretary Paul Nowak pointed out that:

The last thing working people need right now - in the middle of the worst living standards crisis in generations - is to have their wages held down.

With the cost of living crisis intensifying, the CBI is calling for immediate assistance for ‘people facing real hardship’, adding to the pressure on the government to help those hardest hit by Britain’s cost of living crisis.

CBI Director-General, Tony Danker, said the Government must move on two fronts right away.

“The first is to help people facing real hardship now; it’s the moral underpinning of our economy and society. Recent surveys suggest more than one in 10 households have skipped – or had smaller meals – in the past month because of a lack of affordability, while around half a million more households are expected to face choices between heating and eating*. Putting pounds in the pockets of people struggling the most should not be delayed.

“Secondly; start stimulating business investment now – we will need to ensure that there is economic growth in the pipeline to avoid any downturn in our economy that could worsen or prolong the cost-of-living crisis.

European stock markets are set to open higher:

The agenda

  • 7am BST: UK labour market report
  • 10am BST: Eurozone GDP growth statistics for Q1 2022 (second estimate)
  • 1.30pm BST: US retail sales report for Apro;
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