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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Stocks up, dollar down after May’s US jobs report – as it happened

A “Now Hiring” sign in the window of a Dollar Tree store in South Gate, California.
A “Now Hiring” sign in the window of a Dollar Tree store in South Gate, California. Photograph: Getty Images

Germany’s finance minister, Olaf Scholz, is also optimistic that the G7 will agree an historic tax agreement.

Reuters has the details:

German finance minister Olaf Scholz said he was confident that Group of Seven (G7) talks would end in an agreement on global taxation that would change the world.

“These are very successful talks, we are making progress and I’m absolutely confident that we will get agreements today and tomorrow, and we will be able to have a very clear message on global corporate taxation,” he told the BBC following the first day of G7 finance ministers’ meeting in London.

“We will have an agreement which will really change the world.”

Updated

G7: progress being made on tax rules....

Back at the G7 finance ministers meeting in London... the UK has said that progress is being made in talks to reform global corporate tax rules.

In a statement, the Treasury says:

“The group held productive negotiations about reforming the global tax system and tackling the tax challenges that arise in a complex, digital global economy.

The ministers are meeting today and on Saturday, so there’s time for more progress on setting a a minimum corporate tax rate and tightening tax avoidance by multinationals.

France’s finance minister, Bruno Le Maire, also thinks a deal is in sight.

He told the BBC that the G7 are within touching distance of a historic deal to close the net on large companies which do not pay their fair share of tax.

European markets close at new record

European stock markets have closed at a new record high tonight.

The pan-European Stoxx 600 ended 0.4% higher at 452.57 points, with gains in Germany (+0.4%), France (+0.1%), and Italy (+0.46%).

The US jobs report seems to have broadly cheered the markets, while also calming anxiety about a potential tightening of monetary policy.

Richard Flynn, UK Managing Director at Charles Schwab, says the US economic outlook is improving (which should help the rest of the world too):

“The positive direction of wage growth and low unemployment will be welcomed, but today’s lacklustre job numbers will raise concerns around the resilience of the U.S. labour market – and to what extent the pace of the Covid-19 vaccination programme will boost economic activity and employment.

“However, as we move into the summer, the pace of economic growth remains robust, notwithstanding the weaker than expected jobs report. With vaccines continuing to bring COVID cases down, and the economic reopening kicking into higher gear, the data is starting to shine. Gross domestic product (GDP), although a lagging indicator, grew at an annualized quarter over quarter rate of 6.4% in the first quarter. Much of the strength is rightly attributed to the fiscal aid that has been injected into the economy.

The concurrent boom in spending has stirred fears of economic overheating, which has coincided with a surge in commodity prices and a lift in traditional inflation metrics.

We are confident that the labour market will in time bounce back, and want to reassure investors that the reason we are not yet seeing the strong economic data reflected in the nonfarm payroll numbers is due to the unemployment rate is one of the most lagging economic indicators.”

FTSE close: travel stocks drop again

Back in London, the stock market has closed for the week, with the FTSE 100 index up 4.6 points at 7069.

Travel stocks lagged behind, as the airline industry reeled from last night’s decision to put Portugal on the ‘amber list’, meaning arrivals must quarantine on their return.

Jet engine maker and services Rolls-Royce led the fallers, down 2.1%, while BA parent company IAG lost almost 1% (on top of Thursday’s 5% drop).

Among smaller companies, budget airline Wizz Air finished 3.2% lower, and easyJet lost 2.6%. Trainline, which sells tickets for travel in the UK and Europe, fell 2.3%.

Covid-19 anxiety loomed over some hospitality stocks too, with cinema chain Cineworld down 2.5%.

Among the risers, online grocery tech firm Ocado gained 3%, betting group Entain gained 2%, as did food delivery service Just Eat Takeaway.

A drop in orders for motor vehicles and parts hit US factory order books in April.

New orders for US-made goods fell by 0.6% in April, a bigger decline than the 0.2% dip expected, following a 1.4% rise in March.

Orders for motor vehicles and parts fell by 6.1% --- with the global shortage of semiconductors hitting the sector.

Today’s jobs report will intensify the debate over labor shortages, says Daniel Zhao of Glassdoor:

The report doesn’t end the debate around labor shortages, but instead will provide ammo to both sides of the political debate.

The slower-than-expected job gains and drop in labor force participation will be pointed to as evidence that the recovery is being held back by workers staying out of the labor force. Conversely, leisure & hospitality leading job gains despite widespread reports of shortages will be pointed to as an argument for why labor shortages are not significantly impeding job gains.

For now, the rising leisure & hospitality earnings seem to be the strongest evidence that labor shortages are happening, but the report doesn’t definitely signal what’s the reason for these shortages.

Michelle Meyer, head of U.S. economics at Bank of America Corp, warns that shortages of parts and labor held back job growth in May.

So while hiring did accelerate as the jobs market strengthened, with payrolls increasing by 559,000 last month after a revised 278,000 gain in April, it was below Wall Street forecasts of around 650,000 extra hires.

Meyer says:

“On the surface, yes, the jobs numbers were strong, a half million jobs is obviously a good thing, but given where we are in the economy, all else equal it could have been stronger,”

“The fact that it wasn’t is likely a function in large part to supply constraints and labor shortages.”

More here: U.S. Job Growth Picks Up in Sign of Progress on Filling Openings

Marty Walsh, US Secretary of Labor, says there are ‘good, positive signs’ in today’s jobs report.

Walsh told CNBC that the light at the end of the tunnel is starting to get larger, pointing to the job gains in hospitality and education.

He’s hopeful that more people will get back into work in the next couple of months, with hospitality and leisure likely to keep hiring as demand picks up through the summer.

On the $300 UI supplemental benefit (which some people claim is deterring people from returning to work), Walsh says it played a vital role helping people through the pandemic.

But if the labor market does continue to recover, he’d expect fewer people to be signing on for unemployment insurance (benefits), especially as new jobless claims hit a pandemic low yesterday.

He adds:

This is a good solid report...and we need to continue making gains like this.

And on the 0.5% rise in wage growth, Walsh says his office are watching very closely to see the impact of wage increases on inflation.

Full story: US adds 559,000 jobs in May as fears of hiring slowdown fade

The US added 559,000 jobs in May as the coronavirus pandemic receded, shaking off fears of a substantial slowdown in hiring after April’s disappointing monthly report.

The Bureau of Labor Statistics said Friday that the unemployment rate had fallen to 5.8% from 6.1% in April, still significantly higher than the 3.8% unemployment rate recorded in February 2020 before Covid 19 hit the US but less than half its 14.8% peak in April last year.

The news comes one month after the labor department shocked economists by announcing the US had added just 266,000 new jobs in April – far below the 1m gain that had been expected. May’s gains were less than economists had predicted and with the level of employment is still 7.6m jobs below its pre-pandemic peak, economics group Capital Economics calculates it would take more than 12 months at the current pace to fully eradicate the shortfall.

April’s report led to sparring between the Biden administration and Republicans who claimed higher levels of unemployment benefits were keeping people from returning to work and this month’s lukewarm report is unlikely to end that row.

But there are signs of a strong rebound across the US economy. Worker filings for unemployment benefits have dropped by 35% since late April and fell to a pandemic low of 385,000 last week, the labor department said Thursday.

Here’s the full story:

Ben Casselman of the New York Times has written a really interesting Twitter thread, highlighting some key points from the US jobs report:

Updated

The US dollar has lost ground following the jobs report.

That also suggests traders are more confident that the Federal Reserve won’t tighten its bond-buying stimulus program soon, with employment gains below forecasts.

This has pushed the pound up by almost a cent today, to nearly $1.42, close to the three-year high of $1.425 set earlier this week.

Tech stocks, which are sensitive to interest rate concerns, are leading the risers on the Dow.

Intel (+1.4%), Microsoft (+1.36%), Salesforce.com (+1.2%) and Apple (+1%) are all rallying following the jobs report.

Drinks giants Coca-Cola and construction equipment maker Caterpillar are both up 1.1%, suggesting optimism about the economic recovery and the reopening trade.

Updated

Wall Street opens higher

The US stock market has opened higher, as Wall Street traders welcome today’s Non-Farm Payroll report.

The 292,000 increase in leisure and hospitality jobs shows that the economy is recovering.

Plus, the weaker-than-expected payroll gains could calm worries that the Federal Reserve feels pressure to slow its bond-buying programme soon.

  • Dow Jones industrial average: up 142 points or 0.4% at 134,719
  • S&P 500: up 25 points or 0.6% at 4,218 points
  • Nasdaq Composite: up 125 points or 0.9% at 13,740 points

Mike Bell, global market strategist at J.P. Morgan Asset Management, says the 559,000 payroll increase is a ‘Goldilocks’ number (as every child knows, she liked her porridge not too hot, or too cold).

“Another weaker than expected payrolls number is allowing investors to relax a little about the prospect of Fed tightening, while still demonstrating that the hardest hit sectors of the labour market are bouncing back.

“This goldilocks scenario of a labour market recovery that is not too cold to raise concerns about the economy, but not too hot to prompt fears about faster than expected monetary policy tightening, is supportive of equity markets.”

US jobs report: What the experts say

Adding over half a million new jobs would be ‘amazing’ in a normal month, says Paul Ashworth of Capital Economics. But these are not normal times....and job creation is slower than hoped.

The 559,000 gain in non-farm payrolls in May was at least an improvement on the 278,000 gain in April but, with the level of employment still 7.6 million below its pre-pandemic peak, it would take more than 12 months at that pace to fully eradicate the shortfall. Only a few months ago we had expected to see several months’ worth of gains north of one million as the economy reopened, but labour supply is bouncing back much more slowly than demand....

Overall, in any other set of circumstances, monthly gains in excess of half a million would be amazing but, with a 7.6 million shortfall, it will be some time at that pace before the Fed’s “substantial further progress” has been met.

Robert Frick, corporate economist at Navy Federal Credit Union, says the US jobs market has moved into ‘second gear’. He’s encouraged by the rise in teaching and childcare jobs (see earlier post).

“The May jobs report was a major improvement over April’s, but we’re still not in full-speed-ahead mode, despite plummeting COVID-19 cases.

That the economy is reopening was evident in the near 300,000-job increases in leisure and hospitality, which account for half the total increase. Also significant: the high numbers of teachers and childcare workers hired back. This should have a multiplier effect on jobs in the coming months, as working parents who needed to stop or curtail working due to kids at home can resume their careers.

Evidence that many workers in the labor force are choosing to stay on the sidelines: the labor force participation rate is still low at 61.6%. Overall, this is hiring in second gear, and we have the potential to accelerate once some bottlenecks and barriers to working disappear.”

Willem Sels, chief investment officer, Private Banking and Wealth Management, HSBC, says there’s little danger of a ‘broad-based wage spiral’ breaking out:

“Following the big disappointment in the payroll data last month, today’s non-farm payroll release was closely watched, as investors assess whether the factors that limited job creation last month would be temporary or have persisted. In the end, the number bounced a bit less than expected, and there were no material revisions to last month’s number.

It seems that some of the factors that weighed on the numbers last month are slowly easing, and that there continues to a be a slow but gradual return of workers to the labour market, but slower than expected. In our view, unemployment remains too high for a broad-based wage spiral to develop.

Average hourly earnings in the US continue to rise last month, up around 0.5%, which may indicate that some firms are lifting pay to attract workers.

That includes a rise in average hourly pay at leisure and hospitality firms (from $17.86 in April to $18.09 in May), where there have been reports of staff shortages.

However, this has been a tricky area to analyze, because the pandemic has hit lower-paid jobs harder.

The Bureau of Labor Statistics says:

Average hourly earnings for all employees on private nonfarm payrolls increased by 15 cents to $30.33 in May, following an increase of 21 cents in April. Average hourly earnings of private-sector production and nonsupervisory employees rose by 14 cents to $25.60 in May, following an increase of 19 cents in April.

The data for the last 2 months suggest that the rising demand for labor associated with the recovery from the pandemic may have put upward pressure on wages. However, because average hourly earnings vary widely across industries, the large employment fluctuations since February 2020 complicate the analysis of recent trends in average hourly earning.

Updated

Leisure and hospitality payrolls swell, but construction sector lost jobs

More than half the 559,000 new jobs created in May were in the leisure and hospitality trade, where payrolls swelled by 292,000 as people flocked to bars and restaurants.

Nearly two-thirds of the increase was in food services and drinking places (+186,000), with another 58,000 new jobs in amusements, gambling, and recreation, and 35,000 in accommodation.

But, leisure and hospitality is still missing 2.5 million jobs since the pandemic began.

In education, employment rose by 144,000 -- including 53,000 in local government education, by 50,000 in state government education, and by 41,000 in private education.

Health care and social assistance added 46,000 jobs, including 22,000 new jobs in “ambulatory health care services”, and 18,000 in child day care services (perhaps reflecting increased demand from parents returning to work).

Employment in information rose by 29,000, including 14,000 in motion picture and sound recording industries.

Manufacturing employment rose by 23,000. That included a 25k gain in motor vehicles and parts, following a 38k fall in April (blamed on shortages of key parts such as computer chips).

Transportation and warehousing added 23,000 jobs, while employment in wholesale trade increased by 20,000.

But construction employment fell by 20,000, mainly due to job losses for nonresidential specialty trade contractors (-17,000).

That may be due to the shortages of materials that have hit builders in America (and beyond...).

Although below expectations, May’s job growth is an improvement on April’s weak payroll report.

Zach Moller of Third Way Economic says there is “steady improvement”, thanks to the Covid-19 vaccine rollouts.

US unemployment rate drops to 5.8%

The US unemployment rate has fallen to 5.8%, from 6.1%, the jobs report shows.

That’s partly thanks to firms taking on another 559,000 staff last month, helping to bring more people back into work.

The BLS says:

In May, the unemployment rate declined by 0.3 percentage point to 5.8%, and the number of unemployed persons fell by 496,000 to 9.3 million.

These measures are down considerably from their recent highs in April 2020 but remain well above their levels prior to the coronavirus (COVID-19) pandemic (3.5 percent and 5.7 million, respectively.

But...the labor force participation rate has dipped to 61.6% from 61.7%.

That can be a sign that more people have stopped looking for work, and dropped out of the jobs market (this can happen for many reasons, perhaps childcare commitments, or a lack of suitable vacancies...)

US economy added 559,000 new jobs in May

Just in: The US economy added 559,000 jobs in May, as hiring falls below expectations for the second month in a row.

Economists had expected around 650,000 new workers to be taken on last month, as the economy expanded strongly.

April’s disappointing Non-Farm Payroll has been revised slightly higher to show 278,000 new hires, up from 266,000, but that still shows weak job growth.

This may reinforce concerns that American firms are struggling to find labor amid the reopening rush.

The Bureau of Labor Statistics says there were “notable job gains” in leisure and hospitality, in public and private education, and in health care and social assistance (details to follow!)

Here’s our news story on the surge in UK construction growth...and costs... last month.

UK secures new deal with Norway, Iceland and Liechtenstein

Trade news: The United Kingdom has secured a new trade deal with Norway, Iceland and Liechtenstein.

The deal cuts tariffs on some agricultural goods such as UK cheese exports to Norway, along with tariff reductions and quotas on pork, and poultry. UK wines and spirits including Scotch Whisky will also now be recognised in Norway and Iceland, the Department for International Trade says.

In return, import tariffs on shrimps, prawns and haddock coming into the UK will be cut. That, the UK says, will cut costs for UK fish processing and support jobs in that sector.

The deal also includes a chapter on digital trade -- allowing electronic-only paperwork on goods trade which could make importing and exporting smoother.

There’s a cap on mobile phone roaming charges, recognition of professional qualifications, and British businesses can bid for around £200m government contracts in partner countries.

Norwegian Prime Minister Erna Solberg told a news conference in Oslo that “the deal allows for growth in trade for both our countries”.

But as the BBC points out, the deal won’t give the same opportunities as before Brexit.

However, the Norwegian government said the deal with the UK would not restore all the advantages it had when both countries were in the EEA.

“Prior to the UK’s exit from the EU, Norway enjoyed free movement of goods, services, capital and persons to the UK through the EEA agreement,” it said.

“A free trade agreement will not provide similar access to the British market.”

International Trade Secretary Liz Truss says it will boost trade:

Today’s deal will be a major boost for our trade with Norway, Iceland and Liechtenstein, growing an economic relationship already worth £21.6bn, while supporting jobs and prosperity in all four nations at home.

Here’s some reaction:

Winemaker Chapel Down uncorks crowdfunding drive

Chapel Down’s vineyard in Kent.
Chapel Down’s vineyard in Kent. Photograph: David Levene/The Guardian

It may be too early for a tipple.. but those with a taste for wine may be interested in a new fund-raising drive from English winemaker Chapel Down.

My colleague Kalyeena Makortoff has the details:

Chapel Down is asking the public to take part in a fresh funding round worth up to £7m that will help the business expand its vineyard in the North Downs and ramp up exports.

It is the Kent company’s latest attempt to tap into investor enthusiasm for homegrown tipples as the democratisation of shareholding grows.

Chapel Down plans to use the money to scale up its wineries and finish planting grapevines on the North Downs, where its vineyards are expected to produce an extra 500,000 bottles of English sparkling wine a year. Some of the cash will also help develop its online sales portal and export business.

Updated

A virtual GP appointments app used by the NHS has announced a £3bn US stock market listing after agreeing to a blank-cheque company merger that will net its British-Iranian founder almost £1bn.

Babylon’s reverse merger with Alkuri Global, a New York-listed special-purpose acquisition company (Spac), makes it the latest firm to take advantage of a growing Spac trend that makes it cheaper for private companies to go public.

Facebook investigations: snap reaction

The Financial Times explains that regulators in Brussels and the UK have launched “a joint assault” on Facebook’s use of customer data to dominate in core markets such as digital advertising.

The Wall Street Journal say the moves are “ramping up regulatory scrutiny for the company in Europe”, adding:

Both the European Commission—the EU’s top antitrust enforcer—and the U.K.’s Competition and Markets Authority said Friday they are investigating whether Facebook repurposes data it gathers from advertisers who buy ads in order to give illegal advantages to its own services, including its Marketplace online flea market.

Bloomberg has more details of the EU’s case:

The European Commission said it will investigate whether Facebook misuses a trove of data gathered from advertisers to compete against them in classified ads. It will also check if the company unfairly ties its Marketplace small ad service to the social network.

Friday’s move by the EU is the first time it’s escalated a case into Facebook’s behavior beyond the preliminary stages. It follows other high-profile cases targeting Google, Apple Inc. and Amazon.com Inc. The EU previously fined Facebook for failing to provide correct information in the merger review of the WhatsApp takeover.

Although the two investigations are separate, they were announced at the same time this morning.

And both the UK’s CMA and the EC says they will “seek to work closely” together as these independent inquiries develop.

Facebook says it will cooperate fully with both the EU and UK investigations “to demonstrate that they are without merit”.

The social network giant explains:

“Marketplace and Dating offer people more choices, and both products operate in highly competitive environment with many large incumbents”.

We will continue to co-operate fully with the investigations to demonstrate that they are without merit.”

Updated

UK and EC launch antitrust probes into Facebook

A smart phone screen displaying the logo of Facebook on a Facebook website background.

Competition regulators in the UK and European Union have both launched investigations into Facebook, examining whether the social media giant is breaking competition rules.

The UK’s Competition and Markets Authority (CMA) said it will look into whether Facebook is abusing a dominant position in the social media or digital advertising markets, by using advertising data to gain an unfair advantage in the classified ads and online dating sectors.

The CMA will examine if Facebook has unfairly used the data gained from its digital advertising services, and from its single sign-on service (Facebook Login), to benefit its own services.

In particular, it will look at Facebook Marketplace (which runs classified adverts), and its dating profile service Facebook Dating.

Andrea Coscelli, chief executive of the CMA, says the regulator will conduct a thorough investigation.

“We intend to thoroughly investigate Facebook’s use of data to assess whether its business practices are giving it an unfair advantage in the online dating and classified ad sectors.

“Any such advantage can make it harder for competing firms to succeed, including new and smaller businesses, and may reduce customer choice.

Coscelli adds that the CMA will work closely with the European Commission... who have just announced their own antitrust investigation to assess whether Facebook violated EU competition rules.

Again, the EC will examine if the tech giant used advertising data gathered in particular from advertisers in order to compete with them in markets where Facebook is active such as classified ads.

The formal investigation will also assess whether Facebook has tied Marketplace to its social network, giving an unfair advantage in the online classified ads services and breaching the EU competition rules.

It explains that online classified ads providers advertise their services on Facebook’s social network, while also competing with Facebook Marketplace.

The EC says:

Following a preliminary investigation, the Commission has concerns that Facebook may distort competition for the online classified ads services. In particular, Facebook might make use of the data obtained from competing providers in the context of their advertising on Facebook’s social network, to help Facebook Marketplace outcompete them.

Facebook could, for instance, receive precise information on users’ preferences from its competitors’ advertisement activities and use such data in order to adapt Facebook Marketplace

Competition chief, and executive vice-president, Margrethe Vestager, adds

“Facebook is used by almost 3 billion people on a monthly basis and almost 7 million firms advertise on Facebook in total. Facebook collects vast troves of data on the activities of users of its social network and beyond, enabling it to target specific customer groups.

We will look in detail at whether this data gives Facebook an undue competitive advantage in particular on the online classified ads sector, where people buy and sell goods every day, and where Facebook also competes with companies from which it collects data.

In today’s digital economy, data should not be used in ways that distort competition.”

Updated

Economist Richard Ramsey is also struck by the surge in construction costs - both for materials, and subcontractors:

That last point suggests tradespeople are responding to the law of supply and demand, and pricing their time accordingly.....

The UK building boom means that finding skilled construction workers is a real problem, says Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply:

“The construction sector continued its expansion programme with a phenomenal acceleration in growth and the strongest for seven years as new orders filled in at the fastest rate for almost a quarter of a century.

Residential work was back in the top spot as house building rose at the quickest pace since August 2014, serving as an antidote to the recent scarcity in housing for lets or buy, and driven by consumer demand and a boost from the stamp duty holiday.

“Busy purchasing managers were under pressure to keep up and buying up at the fastest rate since April 1997, changing sourcing strategies to find depleting essential materials and stocking up just as supply chain problems continued to mount along with prices. With inflation for goods and raw materials at a 24-year high, companies will be concerned that much-needed profits will be eaten away as building projects take shape and could be held up by some of the longest delivery times on record.

Skills shortages are also becoming a problem, with recruiters finding talented labour hard to find, as job creation was at robust levels and the threat of staffing cutbacks has become a distant memory.”

This chart, from the PMI report, shows just how badly supply chains are creaking:

UK construction PMI, May 2021

The surge in input price inflation is quite startling -- it’s being driven by soaring material costs, and shortages of stocks such as timber, roof tiles, paint, taps and concrete.

UK building firms are hiring new staff at the fastest rate in seven years, to handle the surge in demand in May.

New project starts and a sustained recovery in construction workloads resulted in the biggest jump in staffing numbers since July 2014, the PMI report shows.

UK construction jobs
UK construction jobs Photograph: IHS Markit

And with new orders flooding in, sub-contractor usage increased at a survey-record pace.

UK construction growth at near-seven year high

A worker carries building materials at a Willmott Dixon Ltd. housing development construction site.

UK construction has recorded its fastest growth in almost seven years, fuelled by the biggest jump in new orders since at least April 1997.

The latest survey of UK construction shows that the sector benefitted from surging order books, driven by demand for new homes amid rising economic confidence.

However, cost pressures are also at record levels, as builders scramble to find the raw materials and parts they need.

That’s according to data firm IHS Markit, whose Construction PMI index has jumped to 64.2 in May, up from April’s 61.6. That shows very fast growth, and is the strongest reading since September 2014 (anything over 50 shows expansion).

Markit says the UK construction sector is on a “strong recovery path”, with companies “highly upbeat” about growth prospects for the next year.

New order volumes increased at the fastest pace since the survey began just over 24 years ago, while input cost inflation also hit a survey-record high during May.

Business confidence among builders also jumped sharply, due to “resurgent customer demand”, and optimism about the UK economic outlook following the successful vaccine roll out.

Markit reports:

  • House building (index at 66.3) was the best-performing category of construction activity in May, followed by commercial work (64.4)

  • The latest increase in work on commercial projects was the steepest since August 2007, reflecting strong demand conditions following the reopening of customer-facing areas of the UK economy.

  • Civil engineering activity (index at 61.3) also increased sharply during May, although the pace of expansion eased slightly since the previous month.
UK construction PMI

Tim Moore, Economics Director at IHS Markit, says supply chains are struggling to cope with this rapid output growth, and the surge in new orders to the highest in at least two decades.

“There were widespread reports citing shortages of construction materials and wait times from suppliers lengthened considerably in comparison to those seen during April.

Imbalanced supply and demand led to survey record increases in both purchasing prices and rates charged by sub-contractors.

Despite severe challenges with materials availability, construction firms remain highly upbeat about their near-term growth prospects. Nearly two-thirds of the survey panel forecast an increase in output during the year ahead, while only one-in-thirteen forecast a decline.

UK car sales rise as business confidence recovers

Shukers Land Rover dealership, Shrewsbury, Shropshire, England UK
Shukers Land Rover dealership, Shrewsbury, Shropshire, England UK Photograph: John Morrison/Alamy

UK car sales continued to recover from their pandemic lows last month, but remain below their pre-Covid level.

A total of 156,737 new cars were registered last month -- a jump of 674% compared with May 2020, during the first lockdown.

This follows the reopening of car showrooms, and the relaxing of some pandemic restrictions in April and May.

But, the market has not yet returned to normality. Sales are 14.7% lower than in May 2019, and over 13% below their average for the month over the last decade.

UK car registrations to May 2021
UK car registrations to May 2021 Photograph: SMMT

And so far this year, car registrations are around 29% below their average levels.

Sales to companies to businesses or organisations grew more than twice as fast as private purchases in May. These ‘fleet sales’ made up around half of all new vehicles hitting the road last month, totalling 79,435 sales -- ten times higher than a year ago.

That shows improving business confidence, says the Society of Motor Manufacturers and Traders.

Mike Hawes, SMMT chief executive, said:

“With dealerships back open and a brighter, sunnier, economic outlook, May’s registrations are as good as could reasonably be expected. Increased business confidence is driving the recovery, something that needs to be maintained and translated in private consumer demand as the economy emerges from pandemic support measures.

Demand for electrified vehicles is helping encourage people into showrooms, but for these technologies to surpass their fossil-fuelled equivalents, a long term strategy for market transition and infrastructure investment is required.”

So far this year, plug-in vehicles have accounted for 13.8% of new car registrations, up from 7.2% a year earlier, with plug-in hybrids (PHEV) growing fastest.

Fully electric cars have made up 7.5% of sales this year, with pure petrol engines still around half the market.

UK car sales

The Covid-19 restrictions on touring and performing are also encouraging artists to cash in the value of their music rights, points out John Coldham, IP partner at law firm, Gowling WLG.

Here’s his take on the sale of Joel Little’s song catalogue to Hipgnosis:

The trend to buy up the rights to songs continues, with this latest investment being a continuation of that.

There is nothing new about rights to creative works being bought and sold, but it is interesting that, as the world evolves into digital streaming, there has been a spate of such high profile sales recently. It is likely that some artists wish to realise the value of their catalogue now, rather than wait for the trickle of streaming revenues to come in, especially as they are not able to perform live so easily in the present environment.

These sales demonstrate the value of intellectual property, and ensuring its ownership is properly documented will assist in realising that value later.

Music news: Grammy Award-winning songwriter, producer and musician Joel Little has become the latest musician to sell their works to Hipgnosis Songs Fund.

Little has worked with several leading musicians - including Taylor Swift, and Lorde, co-writing and producing her debut EP and her first album, Pure Heroine’.

The sale of Little’s musical catalogue comes amid the boom in streaming under the pandemic.

Several other big music names have also taken this move; Hipgnosis have recently signed deals with the Red Hot Chili Peppers, Neil Young, Fleetwood Mac guitarist Lindsay Buckingham, and Barry Manilow, along with Metallica and Michael Bublé producer Bob Rock.

Reuters has more details:

Little, whose songs Hipgnosis says have been streamed over 15 billion times, co-wrote and produced four songs on Swift’s 2019 album “Lover,” including “Me!” and “The Man”.

He has also collaborated with U.S. R&B singer Khalid, and in 2014 won a Grammy award with New Zealand singer Lorde after co-producing and writing “Royals”. In 2014 Little co-wrote or produced songs for the “The Hunger Games: Mockingjay, Part 1” movie.

The catalogue totals 178 songs, Hipgnosis said in a statement, and between 2017-2019 earned revenue of $8.6 million. It did not disclose the size of the deal.

Updated

With airlines under pressure, the London stock market is effectively becalmed this morning.

The FTSE 100 index has dropped by 10 points, or 0.15%, to 7054 points while the more UK-focused FTSE 250 is flat.

Traders are keeping firmly to the sidelines ahead of May’s US jobs report -- to see whether hiring bounced back, and whether wages are rising (cue more fretting about inflation).

Connor Campbell of SpreadEx explains:

Analysts’ estimates have the nonfarm number climbing to 645,000 [from 266k in April], with the unemployment rate falling from 6.1% to 5.9%. Average hourly earnings are, as ever, the one outlier, with expectations of 0.2% against the previous month’s 0.7%.

Considering that nonfarm forecast lies somewhere between the levels expected last month, and the number produced last month, it will be interesting to see how investors react. It might hit that sweet spot – strong enough to point to a continuing recovery, but not strong enough to prompt any action from the Fed.

UK hiring surges as economy rebounds, pushing up pay

Although the travel sector is clearly struggling, the wider UK economy is rebounding from the pandemic.

Overnight, a survey has shown that British employers took on permanent staff last month at the fastest rate since at least the late 1990s.

There was also a rush for short-term staff, with temporary staff placements growing at the fastest in six years, according to the Recruitment and Employment Confederation (REC) trade body and accountants KPMG.

Kate Shoesmith, REC deputy chief executive officer, said.

“We now have a consistent picture over the past few months to show that confidence is growing and hiring plans are in motion.”

The survey also found that companies are struggling to hire staff, due to pandemic uncertainty and fewer candidates from the EU. And that drove starting salaries rose last month, at the fastest rate since September 2018 -- in a boost to workers.

Shoesmith said:

“With demand spiking, the skills and labour shortages that already existed in the UK have come into sharper focus – and COVID has only made them worse.”

Analyst: Travel industry's summer hopes hit

AJ Bell financial analyst Danni Hewson says the UK’s new tighter travel restrictions are causing ‘aftershocks’ in the travel sector today:

“The travel sector continued to see aftershocks from yesterday’s earthquake decision to remove Portugal from the green list of travel destinations from the UK. Hopes of anything approaching a normal summer for the industry now look pretty much over.

“Domestically the hospitality sector will be hoping that a full reopening is still on the cards for the 21 June but creeping concern about the threat posed by the Delta variant may send any decision on this to the wire – which is clearly exceptionally unhelpful for businesses.”

Updated

Introduction: Travel stocks hit by Portugal's amber list move

Ryanair flight FR1080 from London Stansted lands in Humberto Delgado International Airport.

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

Travel stocks are sliding this morning after the UK government removed Portugal from the “green list” of countries exempt from significant travel restrictions,

The decision to move Portugal to the amber list is a major blow to the airline sector - just weeks after the UK lifted restrictions on international flights.

It has prompted warnings of a deepening crisis for aviation, with unions urging the ministers to provide more support.

The move was bitterly criticised by the tourism industry, which had been hoping for more countries to be added to the ‘green list’, meaning passengers wouldn’t need to quarantine on their return.

So the news that Portugal will moved to Amber on June 8th, while seven countries, including Egypt and Sri Lanka, are now on the “red list” of destinations that require hotel quarantine, has jolted the sector.

Jet engine manufacturer Rolls-Royce, whose engine servicing business is dependent on planes racking up flying hours, are down almost 2.5% this morning, the biggest faller on the blue-chip FTSE 100.

Shares in British Airways-owner IAG have dropped another 1.5% in early trading, adding to their 5% slide on Thursday as the Portugal news emerged.

Travel stocks are also among the fallers on the FTSE 250 index, with budget airline easyJet dropping by 1.5% (it also fell 5% yesterday). Wizz Air, which warned this week that it would make another loss unless restrictions were eased, are down 2.5%.

In Dublin, Ryanair have dropped another 1%.

The move has also hit the cruise sector, where Carnival are down 2%.

Yesterday’s selloff wiped around £2bn off travel stocks, as the prospect of revenues from Portugal trips faded.

Transport secretary Grant Shapps blamed concerns of a new coronavirus mutation and rising cases for the move; although Portugal called the decision ‘unfathomable’.

Airlines hit out at the plan, with EasyJet’s boss, Johan Lundgren, saying:

“The government has torn up its own rulebook and ignored the science, throwing people’s plans into chaos, with virtually no notice or alternative options for travel from the UK. This decision essentially cuts the UK off from the rest of the world.”

Unions are also concerned about the move, with prospect general secretary Mike Clancy warning that the industry risks losing ‘half of the summer’.

“This news today is further evidence of the instability facing the aviation industry this summer. With government advice shifting regularly it is imperative that proper financial support for the sector is put in place.

“Even in the most optimistic scenario, we now face losing half of the summer before holidaymakers can confidently book travel to major destinations, and the nearer we get to the school holidays the more likely they will be to just stay at home.

Given the uncertainty, Clancy adds, the government must consider doing more to help the sector - or risk seeing travel firms collapse - pushing up unemployment.

“The government starts phasing out its lifeline furlough scheme in four weeks’ time which is only adding to the damaging uncertainty facing aviation.

Ministers need to make clear that further support will be available to support jobs while restrictions on tourist travel remain in place. Without this, there’s a risk that the industry will no longer be there when restrictions are lifted.”

Also coming up today

Investors are bracing for the latest US jobs report, the Non-Farm Payroll, which will show whether hiring in America recovered in May after slowing in April.

Economists predict around 650,000 new hires last month, up from 266,000. A jump in employment would clearly be very welcome, as the US economy is still missing eight million jobs since the pandemic.

But a stronger-than-expected NFP could also jolt the markets, intensifying concerns about inflation- and the possibility that central bankers end their stimulus programmes.

Ricardo Evangelista, senior analyst at ActivTrades, explains:

The narrative in the markets has been dominated by the risk of high inflation becoming a collateral effect of the ongoing gargantuan stimulus. The Fed has, so far, refused to blink, insisting that any spikes in prices are likely to be temporary and that bringing forward the tapering could damage the economic recovery.

Amidst this tug-of-war, employment is likely to become a decisive factor, with a high reading having the potential to force the Fed to start thinking about tapering its current monetary and asset purchase policies. Looking at today’s dollar gains, it appears that many investors are already positioning themselves for such a scenario.

G7 finance ministers are meeting in the UK for two days of talks, where they will try to hammer out a landmark deal to end tax avoidance by multinationals and big technology companies using tax havens to exploit loopholes in the global system.

The UK and Norway are close to signing a trade deal, with a formal announcement expected as soon as today.

UK sources have told City AM that the deal could could cut Norwegian tariffs on British agricultural exports, like beef and cheese, and provide more access to Norwegian fish imports to the UK.

The agenda

  • All day: G7 finance ministers meeting
  • 9am BST: UK car registrations for May
  • 9.30am BST: UK construction PMI report for May
  • 10am BST: Eurozone retail sales
  • 1.30pm BST: US non-farm payroll jobs report for May
  • 3pm BST: US factory orders

Updated

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