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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Pound lifted by signs of UK jobs recovery; US housing starts hit by surging lumber costs – as it happened

London last month, as shops and pub gardens reopened.
London last month, as shops and pub gardens reopened. Photograph: Robin Pope/NurPhoto/REX/Shutterstock

Closing summary

Time to recap:

UK employers who were getting ready for the easing of lockdown started hiring again in March, driving down unemployment for a third consecutive month, according to official figures.

The number of adults seeking work fell to 1.6 million in the three months to March, compared with 1.7 million in the three months to February, the Office for National Statistics said.

The quarterly rate was down to 4.8% from 4.9% in February, amid broader signs of recovery in the jobs market as progress with the Covid-19 vaccine programme helped give companies confidence to take on more staff. City economists had forecast the unemployment rate to remain unchanged at 4.9%.

According to the latest snapshot, the number of employees on company payrolls rose for the fifth consecutive month, but remained 772,000 below pre-pandemic levels, in a sign of the ground still to be made up. The biggest falls in employment came in the hospitality sector among those under 25, and among those living in London.

Early indicators show that the number of job vacancies continued to rise into April as non-essential shops and outdoor hospitality reopened in England and Wales, with most industries displaying growth, notably in the accommodation and food service sectors.

However, the report also showed a rise in longer-term unemployment, and record levels of economic inactivity among younger people, who struggled to find work during the lockdown.

Economists said the labour market appears to be turning the corner, but unemployment is still likely to rise as the furlough scheme ends.

The signs of recovery in the jobs market lifted the pound over $1.42 against the US dollar, for the first time since February.

Sam Cooper, Vice President of Market Risk Solutions at Silicon Valley Bank, said the UK economic recovery appears on track:

“Today’s firm employment data supports the Bank of England’s recent revision to its growth outlook.

A robust labor market further adds to the list of reasons to hold sterling in the current climate, further evidenced by GBPUSD creeping higher on the back of the data release. UK market attention will now turn to tomorrow’s inflation release”

BoE governor Andrew Bailey argued that we’re not seeing strong signs that factory gate prices are pushing up consumer costs...

...as he also denied that the Bank’s QE programme was creating economic inequality.

The latest economic data from the US was less encouraging, though, with housing starts falling by 9.5% last month. Rising raw material costs are hurting construction, with lumber prices surging this year.

Mike Fratantoni, chief economist at the Mortgage Bankers Association in Washington.

“Builders are delaying starting new construction because of the marked increase in costs for lumber and other inputs.

“These supply-chain constraints are holding back a housing market that should otherwise be picking up speed, given the strong demand for buying fueled by an improving job market and low mortgage rates.”

Retailer Home Depot has profited from the scramble for timber, though, with prices quadrupling!

Walmart also beat forecasts, and raised its profit guidance after seeing strong sales, thanks to stimulus spending.

In other news....

It’s been a busy day for transport news.

Eurostar has finally secured a £250m bailout to keep it operating, after suffering a 95% plunge in passengers numbers in the pandemic -- and the UK has resisted pressure to get involved....

But if you’re flying this summer, prepare for long queues when you get home.

Britons returning from holidays abroad can expect four-hour passport queues in cramped, poorly ventilated arrival halls to become the norm this summer, a Border Force worker has told the Guardian.

Jaguar Land Rover made a loss of £860m for its full financial year after its new boss wrote off £1.5bn in a strategy rethink, despite a recovery in sales since the slump at the start of the coronavirus pandemic.

Lamborghini has announced plans to produce only hybrid electric supercars by 2024, becoming the latest sports car producer to shift away from polluting internal combustion engines. A pure electric high-speed vehicle is planned by the end of the decade, with a €1.5bn plan to decarbonise the firm.

Stellantis and the iPhone assembler Foxconn have agreed a deal to work together on in-car information and entertainment technology, in a sign of the accelerating convergence between the tech and automotive sectors.

The shake-up in the media world continues, with Amazon in talks to acquire MGM, the Hollywood studio behind the James Bond and Rocky franchises, for $9bn (£6.3bn).

It’s the latest deal to secure “crown jewel” content in the global battle for streaming supremacy.

Shell has faced a significant shareholder rebellion on a vote calling for the oil company to set firm targets to wind down fossil fuel production.

A shareholder resolution calling for the Anglo-Dutch company to set binding carbon emissions reduction targets received 30% of votes at the oil company’s annual meeting on Tuesday.

Former Tesco boss Dave Lewis has cashed in more than £13m of share options, as he exercised bonuses handed out over his six years at the helm after leaving the group.

Vodafone was the biggest faller on the FTSE 100 on Tuesday as investors reacted to lower than expected profits, a decline in revenues due to the impact of pandemic travel bans and a drop in smartphone sales...and plans to boost its capital expenditure to improve its network.

Here are more of today’s stories:

And finally.... Britain is running short of mini Flakes as people flock to enjoy a 99 ice cream as we emerge from lockdown.

Goodnight, and good luck at the icecream van.... GW

Updated

NatWest chair Davies: Brexit will end the Golden Age of the City

A dragon boundary mark at the City of London.
A dragon boundary mark at the City of London. Photograph: Vuk Valcic/SOPA Images/REX/Shutterstock

The Golden Age of the City is ending, as firms adjust to life after Brexit.

So argues Sir Howard Davies, chairman of the NatWest Group, in a new column for Project Syndicate.

Davies has looked into the impact of Britain leaving the EU to see whether the claims by both sides in the referendum stack up.

On the one hand, a huge amount of share trading has shifted from London to Amsterdam. On the other, fewer jobs have shifted than feared -- although more firms are considering relocation, and the pandemic may be pausing some activity.

But overall, Davies concludes that London will no longer be Europe’s de facto financial centre, once the dust has settled.

Just as firms based in the UK no longer have unfettered access to the EU’s markets, so most EU-located firms will need authorisation to conduct business with London-based clients. So perhaps 300-500, mainly smaller, European firms will need to set up in London. The net result will be an outflow of jobs from London, but not on anything like the scale widely expected in 2016.

That is because firms have found ways to work around the regulatory obstacles. They have also found that moving staff is costly and difficult. London retains many attractions: schools, cultural life, and many long-established expatriate social networks. It will take time for any putative rival in the EU to develop a plausible matching offer.

It seems likely, therefore, that London will remain Europe’s largest financial marketplace, by a considerable distance. It will remain plugged into a global network: transactions with European clients are perhaps a quarter of its business. But it will no longer be the continent’s de facto financial centre.

For the EU, London will shift from being its principal onshore financial centre, to an important offshore centre. Other cities will pick up business, though the signs are that a multipolar system will develop, with no single winner. There will still be a profitable role for London, but the Golden Age of the City as Europe’s financial capital will recede, as Golden Ages tend to do.

Delivery text scams: the nasty new fraud wave sweeping the UK

Anyone who owns a mobile phone in the UK will probably have received a text, or several, claiming they owe a small fee to Royal Mail or other courier firms for a parcel.

It’s a scam, along with similar fake emails, and they’ve tricked many people (including scores of Guardian readers).

My colleague Hilary Osborne explains:

With lockdown, we have all become mail-order shoppers, meaning more chance of a spam text landing with someone who is expecting a parcel. Action Fraud, the UK’s national reporting centre for these types of crimes, wasn’t able to give figures across the delivery industry, but says that between June 2020 and January 2021 it received 2,867 crime reports mentioning DPD, and that victims reported losing £3.4m over the same period. In December, the equivalent of 533 fake DPD emails a day were sent on to the suspicious email reporting service, which was launched last year.

When the Guardian asked readers if they had fallen victim to the scam, it received more than 120 responses in five days. Some were from people who had been taken in by the text and the website, and put in their details before smelling a rat. Others had got as far as pressing enter before they realised something was amiss. Others had been caught out completely.

Do read Hilary’s piece, and spread the word!

FTSE closes flat as travel firms recover but Vodafone sinks

The London Stock Exchange in London, Britain.
The London Stock Exchange in London, Britain. Photograph: Suzanne Plunkett/Reuters

Back in the City, the FTSE 100 blue-chip index has closed just 1 point higher at 7034 points.

Airline group IAG led the risers, up 3.6%, recovering its losses yesterday when worries about Covid-19 variants hit travel stocks and hospitality firms.

Danni Hewson of AJ Bell explains:

British Airways owner IAG was another one of the days big movers – up 3.6% as the reality of summer travel slowly sinks in.

Despite some reports of queues and warnings that holidaymakers should not head to countries on the amber list, images on social media of sun drenched, empty beaches will undoubtedly push some rain-weary consumers towards travel websites.

Cruise operator Carnival (+4%) and budget airline easyJet (+2.1%) also rallied, on the smaller FTSE 250 index.

Accountancy software firm Sage (+3.1%), sportwear retailer JD Sports (+2.75%), and NatWest bank (+2.66%) were also in the FTSE 100 risers, along with DIY chain Kingfisher (+2.1%).

Vodafone, though, sank almost 9% by the close, after reporting a drop in revenues this morning and lower than expected profits.

Investors also baulked at its plans to boost capital expenditure to improve and expand its network, which could eat into cashflow (but also help it grow market share).

Neil Wilson of Markets.com explains:

The higher capex guidance, as Vodafone invests in new tech and services like 5G, is why investors are taking some skin out of the game today.

Interestingly.... Vodafone CEO Nick Read also said his company were “actively engaged” with BT’s Openreach to understand their plans to rollout more high-speed fibre broadband.

Shares in BT closed 2.6% higher, having dropped last week when it announced its broadband plan.

And back on the FTSE 250, Oxford Biomedica jumped 10% after doubling its sales forecast, following a large increase in orders from AstraZeneca to make its Covid-19 vaccine.

Updated

Bailey: No clear evidence input prices are fueling inflation.

On inflation, governor Andrew Bailey says there’s no ‘strong evidence’ that the jump in raw materials and supplies are feeding through to UK consumers.

But, he tells the Lords, the BoE is watching closely:

“We do hear those stories about input prices but we are not yet seeing strong evidence of passing-through into consumer prices.

“But I can assure you that we will be watching this extremely carefully and we will take action when we think it’s appropriate to do so, no question about that.”

Data firm IHS Markit’s latest PMI report found that UK manufacturers put up their prices at a record pace last month, because stretched supply chains pushed up their costs.

Tomorrow morning’s UK inflation report may bring further evidence on this, one way or another....

Today, though, Bailey argues that while inflation will increase in the short term as the economy emerges from the pandemic shock, it will be temporary.

Incidentally, there’s a good explanation here of why QE isn’t monetary financing (because the central bank isn’t buying bonds directly from the government, and because it will eventually sell them back to the market...)

Andrew Bailey also denies that the Bank of England has been funding the government’s spending, insisting that its emergency measures at the height of the crisis stabilised the markets:

Back in June 2020, Bailey said the UK government would have struggled to finance the running of the country without support from the central bank through its QE programme, as global markets came near to meltdown.

And in April 2020, the Bank of England agreed to temporarily extend the government’s overdraft (called the Ways and Means facility) to help cover the costs of the crisis.

The FT called the move monetary financing, saying:

The UK has become the first country to embrace the monetary financing of government to fund the immediate cost of fighting coronavirus, with the Bank of England agreeing to a Treasury demand to directly finance the state’s spending needs on a temporary basis.

Plus, the Covid-19 extension of QE broadly match the increase in government spending, and borrowing, since the pandemic began, which is why UK borrowing costs have remained low.

As Philip Aldrick wrote in The Times last month:

The government’s extraordinary borrowing was made possible by the Bank of England. Not only did it cut interest rates from 0.75 per cent to 0.1 per cent, but for every £1 raised by the government in the gilt market, the Bank bought £1 of gilts through quantitative easing.

In other words, every penny raised in the pandemic has ended up on the Bank’s balance sheet. The state in effect magicked up money in one pocket and moved it to the other. By absorbing the entire pandemic gilt issuance, the Bank kept markets liquid and borrowing costs down.

BoE governor defends QE programme

Bank of England governor Andrew Bailey has been defending the central bank’s asset-purchase programme (quantitative easing, or QE) against the charge that it boosted inequality.

He’s testifying to the House of Lords economic affairs committee. The argument is that, although QE drives up asset prices (owned by the better off), the stimulus package helped the rest of the population too, by lifting employment and earnings.

The Office for National Statistics reported in January that household income inequality hit a 10-year high in 2020, but was lower than during the 2008 downturn.

The ONS also found that the gap between the very richest in society and the rest of the population increased - with the income share of the richest 1% increasing from 7% to 8.3% between 2011 and 2020.

Income inequality for people in retired households remained near historical highs following a 4.2 percentage point increase between 2010 and 2016.

QE began in 2009 as an emergency measure, but was expanded after the 2016 EU referendum, and increased further after the pandemic struck. The BoE is now buying £895bn of mainly government bonds.

Larry Elliott: UK jobs likely to keep recovering if Covid easing can continue

Our economics editor Larry Elliott has analysed today’s UK labour market report, and writes:

The chances of finding work have now started to improve as a result of gradual easing of restrictions. More timely indicators of the jobs market – the HMRC figures for the people on payrolls – showed hiring was up strongly in April and concentrated in those sectors that have taken the biggest hit since the UK first started to feel the effects of Covid-19 in February 2020. Payrolls expanded by 97,000 in April, although they remain three-quarters of a million lower than their pre-pandemic peak.

Assuming the government can stick to its plan of removing all restrictions by June, the improvement in the labour market looks likely to continue, with the under-25s – the age group most badly affected by lockdowns – the main beneficiaries.

Larry also flags that the apparently strong 4% rise in pay packets should be treated with a lot of caution - wage pressures are much more muted.

The strength of earnings growth is something of a mirage, however, because the makeup of the labour market has changed over the past year, with people in higher-paid jobs continuing to work as normal but those in lower-paid jobs being furloughed or made redundant.

The ONS estimates these compositional changes boosted growth by almost three percentage points in March. Private pay settlements are running at about 1% – a much better guide to what is actually going on.

Back in the currency markets, the pound is still trading around its highest levels since late February.

Sterling is up over half a cent at $1.4195 (having reached $1.422 this morning), with the drop in unemployment and rise in company payrolls providing support.

The euro is also racking up gains against the weak dollar, up half a cent at $1.221.

The dollar is generally weaker against a basket of currencies, as traders shake off worries that rising inflation could trigger US interest rate rises.

Kit Juckes of Société Générale says investors are more upbeat today.

As for FX market today, risk sentiment is positive, commodity prices and equities are stronger and the dollar’s weaker.

UK employment suggest that the labour market is now on an improving trend and vaccination rates suggest the Eurozone is going to a growth acceleration too.

Cautious start on Wall Street but Walmart rises

The New York stock market has opened cautiously

The Dow Jones industrial average is down 80 points, or 0.25%, at 34,246 while the broader S&P 500 dipped by 0.15%.

Tech stocks are stronger, though, with the Nasdaq Composite up 0.35%.

Walmart are leading the Dow risers, up 2.5%, after beating sales and profit forecasts for the last quarter, and raising earning guidance for this year.

Total revenue rose 2.7% year on year to $138bn in the three months to April, beating analysts’ forecasts, while US e-commerce sales jumped 37% as more people shopped from home.

Chief executive officer Doug McMillon said that government stimulus checks boosting spending as shoppers return to stores:

Our optimism is higher than it was at the beginning of the year. In the U.S., customers clearly want to get out and shop. We have a strong position as our store environment improves and eCommerce continues to grow.

Stimulus in the U.S. had an impact, and the second half has more uncertainty than a typical year. We anticipate continued pent-up demand throughout 2021.

Updated

Eurostar gets £250m bailout

Eurostar trains in St. Pancras railway station, London, England.
Eurostar trains in St. Pancras railway station, London, England. Photograph: John Michaels/Alamy

Train operator Eurostar finally secured a £250m ($355 million) refinancing deal from its shareholders and banks today, to help it ride out the pandemic.

After months of uncertainty, the £250m package led by the French government includes £50m equity from shareholders, £150m in new loans from banks that are guaranteed by shareholders, and £50m from restructured existing bank loans.

Chief executive Jacques Damas said the refinancing was “a major step towards securing Eurostar’s future”, and helping it keep running trains through the Channel Tunnel

Eurostar was particularly badly hit by Covid-19, with passenger numbers plunging 95% after the first lockdowns began and travel restrictions were imposed.

The UK, which sold its shareholding in Eurostar six years ago, resisted pressure to join the bailout.

The FT explains:

The package is led by France’s state-owned railway group and 55 per cent shareholder, SNCF, along with Canadian institutional fund manager Caisse de dépôt et placement du Québec, Hermes Infrastructure and the Belgian state rail operator.

The UK, which sold its 40% stake in Eurostar in 2015, did not take part. Grant Shapps, transport secretary, said in February that Eurostar was “not our company to rescue” given it was majority owned by the French state.

There was a sense of vindication in the British government on Tuesday morning after the Eurostar shareholders agreed a bailout without any UK involvement.

“It’s about time, we always thought they could raise the money themselves but they tried it on with us,” said one official. “Of course it is wonderful news and a sign of optimism about good times ahead for travel.”

A shortages of builders is also hitting house construction in the US, reckons Chad Moutray of the National Association of Manufacturers.

Diane Swonk, chief economist at Grant Thornton, also blames the ‘stratospheric’ lumber prices for the drop in US housing starts (although, she points out, lumber has dipped back recently)

US housing starts fall sharply as lumber prices surge

The number of new house-building projects in the US fell sharply last month, following a surge in prices of raw materials such as lumber.

Housing starts dropped by 9.5% in April, to an annual rate of 1.569m (from 1.733m in March). This was driven by single family homes, where starts slumped 13%.

This is much weaker than expected, following a surge in activity in March following disruption from bad weather.

Joseph Brusuelas, chief economist at accountancy group RSM, reckons rising input costs are hitting construction.

Odeta Kushi of insurers First American shows how lumber prices have soared, with sawmills struggling to keep up with surging demand:

An infestation of mountain pine beetle Dendroctonus ponderosae in British Columbia has also hit supplies, meaning some lumber prices quadrupled over the last year.

Building permits rose 0.3%, slower than expected, points out Liz Ann Sonders, chief investment strategist of Charles Schwab.

Updated

Amazon in talks to buy Hollywood studio MGM

A poster for MGM’s James Bond movie “No Time to Die”, which was delayed by the pandemic.
A poster for MGM’s James Bond movie “No Time to Die”, which was delayed by the pandemic. Photograph: Mladen Antonov/AFP via Getty Images

It’s all action in the TV and film world this week.

Amazon is in talks to acquire MGM, the Hollywood studio behind the James Bond and Rocky franchises, in a $9bn (£6.3bn) deal that would bolster the tech giant’s entertainment offering.

My colleague Mark Sweney explains:

MGM, which put itself up for sale in December, is one of the few Hollywood studios with “crown jewel” franchises not to have been snapped up in the wave of mega mergers and acquisitions in the media industry in recent years.

The studio has explored selling several times over the last few years. In January last year it held preliminary talks with Netflix and Apple among others, but price proved to be a stumbling block.

However, the streaming wars continue to fuel huge inflation in the prices willing to be paid for must-have content, and proven global franchises are becoming increasingly scarce and, as a result, rocketing in value.

We saw the impact of the streaming wars yesterday, with AT&T deciding to merge its WarnerMedia arm with Discovery to form a new film and TV empire to challenge Netflix and Disney+.

A vanilla ice cream cone

The UK has been hit by an unexpected shortage as the lockdown eases. Mini Flakes to pop into a cone of soft icecream are running low, after a surge of demand.

My colleague Zoe Wood explains:

Britons can now enjoy a pint in a pub or a restaurant meal but it turns out that, after months of hardship, the taste of freedom is a 99 ice-cream.

The heavy rain that has accompanied the lifting of lockdown restrictions has not put off Mr Whippy fans with unexpectedly high sales threatening to exhaust supplies of the mini Flakes that form an essential part of the 99 experience.

“We are seeing a recent increase in demand for our Cadbury 99 Flake in the UK and Ireland that we had not expected,” said a spokeswoman for Mondelēz, which owns Cadbury.

The food group, which owns a large number of other chocolate brands including Dairy Milk, Milka and Toblerone, did not say how long it expected the shortage to last.

However, in a statement, it said: “The product is still available to order and we’re continuing to work closely with our customers.”

Updated

Trinity Leeds shopping area
Trinity Leeds shopping area Photograph: Richard Saker/The Observer

Landsec, one of Britain’s biggest property companies, has warned of a slow recovery in visitors to central London and a sharp increase in retailer insolvencies at its shopping centres once government support ends, as its full-year loss widened to £1.4bn.

The company, which owns the Trinity Leeds shopping centre, Bluewater in Kent and the O2 Centre in London, said its rental income fell by 30% in the year to 31 March. This pushed its loss before tax up to £1.4bn, from £837m in the previous year.

Visitor numbers at its shops in central London fell 82% over the year.

Landsec reported that sales at its outlet malls such as Braintree Village in Essex were up 14% on 2019 levels since the reopening of shops on 12 April.

Mark Allan, the Landsec chief executive, said:

“I was encouraged to see the relish with which people returned to experience in-person shopping as the easing of lockdown measures began in April.”

Lamborghini outlines plans for electric supercar....

The Lamborghini booth at Auto Shanghai 2021 last month
The Lamborghini booth at Auto Shanghai 2021 last month Photograph: Zhe Ji/Getty Images

In the car world, Italian supercar maker Lamborghini has announced plans for a fully-electric car...by the end of the decade.

Lamborghini says it will spend more than €1.5bn over the next four years on this transition, to cut emissions from Lamborghini models and its factory at Sant’Agata Bolognese, Italy.

The aim is to launch its first hybrid production car (with both an internal combustion engine and an electric motor) in 2023, and electrify its entire range with hybrid engines by the end of 2024.

Autocar have more details:

The brand’s three existing models will be electrified in 2023 and 2024, with the arrival of the facelifted Urus SUV and what are expected to be the successors to the V10 Huracán and V12 Aventador supercars.

While the Urus will offer various powertrains where regulations allow, the Huracán and Aventador successors are likely to be sold exclusively as plug-in hybrids.

Lamborghini says its engineers and technicians will develop new technologies and use “lightweight carbon fiber materials” to compensate for weight due to electrification.

And a company is aiming for a fully-electric Lamborghini in the second half of the decade, saying:

Acceleration in the second part of the decade will be dedicated to full-electric vehicles.....

Technological innovation in this phase will be oriented towards ensuring remarkable performance, and positioning the new product at the top of its segment.

However, in the short-term - the focus is on “celebrating the combustion engine”, with two new cars powered by V12 engines being announced later this year.

Stephan Winkelmann, President and CEO of Automobili Lamborghini, says the firm wants to help reduce its environmental impact.

Lamborghini’s electrification plan is a newly-plotted course, necessary in the context of a radically-changing world, where we want to make our contribution by continuing to reduce environmental impact through concrete projects.

Our response is a plan with a 360 degree approach, encompassing our products and our Sant’Agata Bolognese location, taking us towards a more sustainable future while always remaining faithful to our DNA.

Despite the drag from Vodafone (-6%), the UK FTSE 100 has risen by around 27 points or 0.4% so far today, to 7060 points.

Optimism about the UK recovery from the pandemic seems to be lifting stocks. Bank NatWest (+2.5) are the top riser, with retail group JD Sports (+2.4%) and airline group IAG (+2.4%) among the risers.

Mining giants Glencore (+2%) is benefitting from a pick-up in commodity prices, due to the weaker dollar.

Tobacco firm Imperial Brands (+2%) rallied after lifting its dividend by 1%. It also reported a 3.5% rise in organic net revenue over the last six months (including 16% for its ‘next generation products’ such as heated tobacco and vapour), having raised prices.

Steve Clayton, fund manager of the HL Select UK Income Shares fund, which has a position in Imperial, explains:

“Imperial are generating plenty of smoke, but still without any real fire. The numbers were solid enough, but despite the reported growth, the underlying performance of the tobacco business was actually a small decline in profitability.

What went well was pricing; Imperial saw price growth of 5.3%, and with premium cigars performing well, there was a product mix benefit of another 1.2% on top. Imperial succeeded in steadying its market share in its five priority markets of the US, UK, Germany, Spain and Australia. Losses in the Next Generation Products arm fell, as Imperial took action to steady that ship.

We’ve also had confirmation that the eurozone fell back into recession earlier this year, with GDP dropping by 0.6% in Q1 (in line with the initial estimate at the end of April).

Employment across the euro area fell by 0.3% in January-March, as lockdown restrictions imposed across the region hit companies, reversing jobs growth in October-December.

But investors are looking ahead, hopeful that the eurozone will rebound this summer as tourism resumes. The Stoxx 600 index is up 0.4% this morning near to a record high, with euro stronger too.

Sophie Griffiths, Market Analyst at OANDA, says:

The risk-on market mood is keeping the euro elevated above 1.22, a three-month high. Several European countries are starting to ease pandemic restrictions as Covid numbers decline.

After a slow start, the vaccine programme is also ramping up on the old continent, setting the scene for a strong re-open and a pick up in tourism over the critical summer months in countries such as Italy and Spain.

Pound highest since February again weak dollar

The pound has risen to its highest level against the US dollar in almost three months

With the dollar weakening generally, sterling rose 0.5% to $1.422 this morning, its highest since 24th February (which was the strongest since April 2018).

The pound vs the US dollar
The pound vs the US dollar this year Photograph: Refinitiv

The drop in the UK unemployment rate, to 4.8%, and the increase in employment, are supporting the pound, says Jeremy Thomson-Cook, chief economist at international business payments firm Equals Money.

A stronger than expected jobs report and a weaker dollar are helping propel GBPUSD close to the highest levels of the year.

Jobs data from the UK showed the first gain in employment since the pandemic began with 84,000 gaining jobs in April as the economy emerged from the latest series of lockdowns. The labour market is very much a two-tier story at the moment; jobs either being snapped up by high-skilled workers furloughed or made redundant through the pandemic or low-skilled workers remaining unable to gain new employment.

The euro is also stronger against the dollar, gaining around 0.5% to $1.221, amid optimism that vaccination rollouts will help the eurozone economy recover this year.

The dollar, meanwhile, is being pulled down by expectations that the US Federal Reserve will maintain its stimulus programme, despite the pick-up in inflation recently.

Raffi Boyadjian, senior investment analyst at XM, explains:

A pick-up in Europe’s vaccination pace along with the gradual easing of virus restrictions in several Eurozone countries have revived the euro’s fortunes, rallying more than 4% since the beginning of April.

However, rising Eurozone government bond yields on the back of speculation that the European Central Bank might start planning its exit strategy from the emergency stimulus as early as June are also fuelling the single currency’s rebound. Unlike the Fed, the ECB has not put up a united front when it comes to policymakers’ views on how soon bond purchases should be dialled back and this is exacerbating the dollar’s weakness against the euro.

Vodafone hit by pandemic travel bans and lower smartphone sales

A Vodafone shop..
A Vodafone shop.. Photograph: May James/SOPA Images/REX/Shutterstock

In the City, shares in Vodafone have slumped by over 6% this morning, making the mobile company the biggest faller on the FTSE 100, as investors reacted to a hit on revenues due to the impact of pandemic travel bans, a drop in smartphone sales and lower than expected profits.

While Vodafone swung back to the black last year, reporting profits of €536m compared to a loss of €455m in 2019, the result was at the lowest end of the company’s guidance and disappointed City expectations.

The mobile operator reported a drop in total group revenues of 2.6% to €43.8bn blaming factors including a drop in roaming revenue, the charges some customers pay when using their phones abroad, as pandemic restrictions halted most travel and tourism.

“People being less ‘mobile’ in general is bad news for mobile telecoms groups like Vodafone,” said Russ Mould, investment director at AJ Bell.

“Vodafone saw its revenue and earnings hit by lower roaming charges as individuals were unable to travel thanks to the pandemic. Handset sales have also slumped, suggesting we’re not so bothered about having the latest, fancy new phone when we’re stuck at home.”

The company’s biggest market, Germany, which accounts for 31% of total revenues, performed strongly growing total revenues by 7.5% to €13bn last year. The UK, which accounts for 13% of total revenue, saw revenues fall 5% to €6.1bn.

Vodafone’s Europeans mobile customer base grew by 2% to 65.4m, with the rate of customers leaving the company falling from 14.6% to 13.7%, as broadband customer numbers rose from 25m to 25.6m.

Investors were also unhappy at an increase in annual capital expenditure, up from €7.85m to €8bn, which will hit its free cash flow.

Nick Read, Vodafone chief executive, said the investment in 5G and broadband infrastructure would pay off over the longer term.

“The world has changed,” said Nick Read, Chief executive at Vodafone.

“The pandemic has shown how critical connectivity and digital services are to society. Vodafone is strongly positioned and through increased investment, we are taking action now to ensure we play a leadership role and capture the opportunities that these changes create.”

Updated

Josie Dent, managing economist at economic consultancy CEBR, points out the increase in UK payrolls last month was driven by ‘finance & insurance’ and ‘administrative & support services’ firms.

She adds:

“The labour market recovery continued into April, with a further 97,000 people in payrolled employment compared to March.

The hospitality industry in particular will have benefitted from a resurgence in demand as outdoor venues were permitted to open on 12th April.

However, payroll data by industry shows that the number of employees in the accommodation and food services industry exhibited little change between March and April, suggesting that most businesses brought existing workers back from furlough, rather than hiring new workers.”

The highest growth rates in payrolls were seen in the finance & insurance and administrative & support services sectors.

UK payrolls
UK payrolls Photograph: CEBR

[If you strip out seasonal adjustments, accommodation and food services payrolls did rise by over 28k in April, but were down 6k when seasonally adjusted.

The 97k increase in payrolls is also a seasonally adjusted figure, to give a better picture of the labour market].

This chart from ING also shows the recovery in admin and support payrolls:

UK payroll change by sector
UK payroll change by sector Photograph: ING

Full story: UK unemployment drops as businesses hire amid Covid easing

UK employers preparing for the easing of lockdown started hiring again in March, driving down unemployment for a third consecutive month, according to official figures, my colleague Richard Partington reports.

The number of adults seeking work fell to 1.6 million in the three months to March, compared with 1.7 million in the three months to February, the Office for National Statistics said.

The quarterly rate was down to 4.8% from 4.9% in February, amid broader signs of recovery in the jobs market as progress with the Covid-19 vaccine programme helped give companies confidence to take on more staff.

According to the latest snapshot, the number of employees on company payrolls rose for the fifth consecutive month, but remained 772,000 below pre-pandemic levels, in a sign of the progress still to be made. The biggest falls in employment came in the hospitality sector among those under 25, and among those living in London.

Early indicators show the number of job vacancies continued to rise into April as non-essential shops and outdoor hospitality reopened in England and Wales, with most industries displaying growth, most notably in the accommodation and food service sectors.

However, the number of roles on offer remains below pre-pandemic levels, with arts, entertainment and recreation, and the hospitality sector worst affected.

Here’s the full story.

ING developed markets economist James Smith says today’s data provides further signs that the jobs market is starting to turn the corner.

Despite the recent lockdown, the unemployment rate slipped to 4.8% in the three months to March. And actually if we look at more timely weekly data, the rate averaged 4.6% in the last six weeks of the first quarter – going briefly as low as 3.9% (though this data is pretty noisy).

ING expect the jobless rate will rise, though, peaking at around 6% in the autumn, with the furlough scheme ending in September.

The rebound in job adverts in some of the hardest-hit sectors suggests the increase in the jobless rate may be fairly short-lived, he adds:

We can already see signs of a rapid turnaround in the hospitality sector over recent weeks, where online job adverts have returned quickly to pre-virus levels since the reopening road-map was announced.

While this is a ‘flow’ measure and clearly isn’t the same as saying employment has returned to where it was before the pandemic, it does suggest some of the past employment losses we’ve seen over recent months could be quickly reversed over coming months.

UK vacancies

Updated

The UK labour market is now on the front foot, with most of the falls in employment probably behind us, says Thomas Pugh of Capital Economics.

He explains:

The 84,000 rise in LFS employment in the three months to March (consensus forecast +50,000) was the first increase since March 2020. And vacancies rose by another 36,000 taking them to 15% below their pre-crisis level.

Online job vacancies are already back to their pre-crisis level and point to employment remaining strong.

Pugh adds that the unemployment rate may rise to around 6.0% by the start of 2022, having dropped to 4.8%, but should fall pretty rapidly afterwards:

The unemployment rate may still rise over the rest of this year. But this will probably be due to people re-joining the labour market rather than more people losing their jobs.

Of course, this is all dependent on the path of the pandemic, and whether the UK is able to exit the crisis - or if new variants force new restrictions to be imposed.

George Eustice, the environment secretary, has confirmed this morning that local lockdowns might be needed if the situation were to deteriorate in some areas. Our UK Covid liveblog has more details:

Resolution: Hiring spree underway, but 4m jobs still missing

UK firms are on a “hiring spree”, says Resolution Foundation, with payrolls swelling by 97,000 last month, and vacancies near to pre-crisis levels.

But Resolution also warn that there’s an employment gap of over 4 million jobs to fill.

That’s made up of the fall in payrolled employees (down 772,000) and self-employed workers (270,000) since February 2020, along with the estimated 3.1 million workers still on furlough.

Hannah Slaughter, economist at the Resolution Foundation, explains:

“The labour market has entered a new phase, starting to recover in April as the economy reopens, with the number of payrolled employees increasing by almost 100,000.

“But the UK’s 4.2 million ‘Covid employment gap’ shows we still have a long way to go to return to pre-pandemic employment levels.

“And early signs are emerging of which big structural changes from the pandemic will last, with hospitality bouncing back even as jobs in high street retail are not. Adapting to this changed world will be a key challenge for workers, and policy makers, in the years ahead.”

More help needed for young people, as economic inactivity hits record

Economic inactivity among for young people has hit a record high, with fewer 16-24 year-olds in work or looking for a job.

It highlights how younger people have been particularly affected by the pandemic, with fewer opportunities for work during the lockdown (with bars and restaurants shuttered until last month, and only serving inside since yesterday).

Over the last quarter there was a decrease in the employment and unemployment rates for young people, particularly amongst 16- to 17-year-olds, the ONS says:

This suggests that more young people are staying in education and not looking for work, which is supported by the record economic inactivity rate of young people in full-time education.

UK economic activity rates by age
UK economic activity rates by age Photograph: ONS

Eleanor Harrison OBE, chief executive at youth charity Impetus, says the government must extend its support for young people:

“Young people make up nearly two-thirds of job losses since the start of the pandemic. As many clamber to spend savings and disposable income at newly reopened pubs and restaurants, this will be the first income for many young people since the beginning of the pandemic as they return to work in the hospitality sector, one of the largest employers of under-25s.

“A coordinated long-term plan is needed to support the thousands of young people still looking for a way back into meaningful work, starting with the extension of the government’s flagship youth employment scheme; Kickstart is not a nice to have – it’s a must .”

[The £2bn Kickstart scheme creates 6-month work placements for unemployed people aged 16-24]

Rise in long-term unemployment risks lasting scars

Today’s jobs report also shows a worrying increase in longer-term unemployment since the pandemic began.

The number of people out of work for at least a year rose to 381,236 in January-March, up from 299,109 a year ago.

The number of people unemployed for between 6 and 12 months has risen too, and more sharply, to over 375,314, from over 205,523 in Q1 2020.

UK unemployment by duration
UK unemployment by duration Photograph: ONS

This rise in longer-term unemployment shows the long-term damage caused by the pandemic, explains Institute for Employment Studies director Tony Wilson:

“Today’s figures confirm that the labour market is turning the corner – with a sharp rise in employee jobs in April as the economy reopened, vacancies rising and unemployment now clearly trending down. However you don’t have to look too far to see the lasting damage caused by a year of lockdowns and disruption. Long-term unemployment rose by more than a quarter in the last year, its fastest rate of growth since the 2010 crisis.

Older people in particular are now starting to see sharp rises, with long-term unemployment reaching its highest in five years. With many firms reporting difficulties in filling jobs as the economy reopens, government and employers will need to do more to bring the long-term unemployed back into work and help avoid this crisis leading to lasting scars.”

Overall, the number of people classed as unemployed fell by 121,000 in January-March (from 1.744m to 1.623m).

The employment total rose by around 83,000 (the first increase since the coronavirus crisis began).

Redundancies also fell in January-March, but remain higher than before the pandemic.

There were around 153,000 redundancies in the first quarter of 2021, down sharply on the 343,000 recorded in October-December. That pulls the redundancy rate down to its lowest in eight months:

UK redundancies
UK redundancies Photograph: ONS

Redundancies hit record levels last autumn, as struggling firms cut staff before the government extended its furlough scheme in a late u-turn.

Updated

Today’s UK labour market report also shows that regular pay packets grew by 4.6% per year in January-March (or 3.6% after inflation)...

..however, that’s partly because the pandemic hit lower-paid workers harder. As more lost their jobs, or were furloughed, a ‘compositional effect’ pushed up average pay levels.

The ONS estimates that underlying wage growth is around 2.5% for total pay and around 3.0% for regular pay.

Updated

ONS Director of Economic Statistics Darren Morgan points out that the drop in unemployment in January-March was partly due to some unemployed people no longer looking for work, as the UK went into lockdown again:

Employment minister: fall in unemployment is welcome news

Minister for Employment Mims Davies MP says today’s employment report shows the “resilience” of the UK jobs market:

“A continued fall in unemployment, a further rise in vacancies, and growth in the employment rate is welcome news as we continue on our roadmap to recovery.

“While there is more to do to make sure we support jobseekers over the coming months, these figures highlight the resilience of our jobs market and ability for employers to adapt – and through our Plan for Jobs we’re continuing to create new opportunities for people right across the country.

Vacancies at UK firms also rose over the last three months, to the highest level since the pandemic began.

The ONS reports that most industries advertised more jobs, with accommodation and food service activities more active (in preparation for the relaxing of restrictions in April, and again yesterday).

It estimates there were 657,000 job vacancies in February-April. That’s the highest since the first quarter of 2020, just before the first lockdown.

And in April alone, vacancies rose near to their pre-pandemic levels (according to ONS experimental data, and online jobs site Adzuna).

UK vacancies
UK vacancies Photograph: ONS

Payrolls rise in April...but still 772k below pre-pandemic levels

The number of people on company payrolls rose in April, as some firms reopened as lockdown restrictions were eased.

The ONS estimates that 97,000 more people were in payrolled employment last month, compared with March.

That’s the fifth monthly increase in a row.

UK payroll numbers to April 2021
UK payroll numbers to April 2021 Photograph: ONS

However, company payrolls are still 772,000 below pre-coronavirus pandemic levels, with young people - and those in the hospitality sector - worst hit by the job losses.

The ONS says:

Since February 2020, the largest falls in payrolled employment have been in the hospitality sector, among those aged under 25 years, and those living in London.

Updated

Introduction: 'Signs of recovery' in UK jobs market as unemployment rate falls

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

Britain’s unemployment rate has fallen, in a sign that the labour market may be recovering as the economy emerges from the Covid-19 lockdown.

The UK unemployment rate in January-March fell to 4.8%, down from 4.9% a month ago, and 0.3 percentage points lower than the previous quarter, new figures from the Office for National Statistics show.

But, unemployment is still 0.8 percentage points higher than in December-February 2020, reflecting the economic damage caused by Covid-19.

The ONS also reports that the employment rate increased for the first time since the start of the pandemic. It rose to 75.2% in January-March, up 0.2 percentage points over the quarter, for the first time since December 2019 to February 2020.

However, with lockdown restriction in force across the country during the quarter, the UK economic inactivity rate rose, meaning that more people dropped out of the labour market. It was estimated at 21.0%; 0.8 percentage points higher than December 2019 to February 2020 and 0.1 percentage point higher than the previous quarter.

Total hours worked also fell, due to the pandemic restrictions.

UK unemployment data, Q1 2021
UK unemployment data, Q1 2021 Photograph: ONS

The ONS says there are ‘signs of recovery’.

Following a period of employment growth and low unemployment, since the start of the pandemic employment has generally been decreasing and unemployment increasing.

However, the latest (January to March 2021) estimates show signs of recovery, with a quarterly increase in the employment rate. Meanwhile, there was a quarterly decrease in the unemployment rate and the economic inactivity rate increased on the quarter.

With the reintroduction of many coronavirus restrictions, total hours worked decreased on the quarter.

More details and reaction to follow.....

Also coming up today

A new report has warned that Britain risks mirroring Italy’s economic woes unless it develops a strategy for tackling the five seismic changes that will shape the next decade.

Our economics editor Larry Elliott explains:

A joint project by the Resolution Foundation thinktank and the London School of Economics said the UK was neither used to nor prepared for the challenges posed by the aftermath of Covid-19, Brexit, the net zero transition, automation and a changing population.

Announcing the launch of their Economy 2030 Inquiry, the two organisations said muddling through without a proper plan would be disastrous for the living standards of individuals and the economy as a whole.

European stock markets are expected to open higher this morning, with the FTSE 100 called up

The agenda

  • 10am BST: Eurozone Q1 GDP figures (second estimate) and March trade data
  • 1.30pm BST: US building permits and housing starts for April
  • 3pm BST: House of Lords Economics Affairs Committee hearing into QE, with Bank of England governor Andrew Bailey, and deputy governors Ben Broadbent and Dave Ramsden

Updated

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