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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Young people and part-time workers hit by fall in UK employment – business live

A Jobcentre Plus near Westferry in east London.
A Jobcentre Plus near Westferry in east London. Photograph: Philip Toscano/PA

UK employment takes biggest tumble in four years

Time for a recap, from our economics editor Larry Elliott, on today’s jobs data:

Employment in the UK has fallen at its fastest rate in four years amid growing evidence that a slowing economy is taking its toll on the labour market.

Figures from the Office for National Statistics showed that pay growth had fallen back in the three months to September, leading to speculation that the jobs market is past its peak.

Publishing data that may increase the chances of a cut in interest rates from the Bank of England, the ONS said employment had fallen by 58,000 during the third quarter of 2019. It was the biggest fall since May 2015.

The drop in employment was smaller than the 102,000 fall the financial markets had been expecting but job vacancies continued to be scarcer and saw their biggest annual fall since late 2009.

Strong growth in employment has been a feature of the economy in recent years but a slowdown in growth and heightened Brexit uncertainty made businesses more cautious about hiring during the summer.

The fall in employment was accompanied by an easing of annual earnings growth to 3.6% on both the measures used by the ONS – including and excluding bonuses....

Professor Costas Milas Liverpool University has also crunched today’s data, and reckons that the unemployment rate (now just 3.8%) probably won’t fall any further.

He explains:

I have plotted a measure of the UK output gap (UK GDP relative to ‘trend output; the latter based on the average of three standard trend measures: quadratic trend, Hodrick-Prescott trend and Christiano-Fitzgerald trend) together with the UK unemployment rate and annual changes in the UK unemployment rate.

As the economy expands, unemployment drops. It now appears that the economy has settled to around 0.9% below par which means that a further drop in the unemployment rate (from its current values 3.8%-3.9%) does not look likely.

UK unemployment data
UK unemployment data Photograph: Costas Milas

Unless, of course, there is a surge in demand.....

This looks unlikely in the current climate of Brexit-related uncertainty. Unless, of course, the BoE cuts the policy rate….Which, MPC might want to do because, as the plot shows, the very fact that output is below equilibrium implies a low risk of inflation!

Back in the markets, eurozone stocks are still higher today as investors await Donald Trump’s speech at the New York economic club at 5pm UK time.

Ben White of Politico has heard that the president will make encouraging noises about a trade deal with China. He writes:

There will be plenty of cheerleading about the low jobless rate, wage growth, stock market gains and the extension of the longest economic recovery in history. Perhaps even some stuff about the “greatest economy ever.”

But the most interesting section will be on China. Investors around the world will be looking for signals about whether a “Phase One” deal where tariffs on both sides are reduced and the further levies on consumer goods imported from China expected to go into effect in December disappear, at least for now. MM is told by a source familiar with Trump’s remarks that there will a “constructive statement on China.”

Such comments could boost Wall Street. However, the futures market is predicting a flat open, ahead of Trump’s comments.

Here’s a handy thread on today’s jobs data, from Chris Giles of the Financial Times:

The drop in part-time workers, and in younger workers, is a worrying sign, according to the Resolution Foundation:

Their economic analyst Nye Cominetti explains why it could herald a downturn:

“Until now the jobs market has seemed immune to wider economic conditions, and the uncertainty that is dragging on UK growth. But falling employment, fewer vacancies and slowing pay growth suggest this may no longer be the case.

“The recent drop in female employment and slight uptick in youth unemployment are worrying symptoms, as these groups are often first to feel the effects of falling employment.

“Today’s signals should give all political parties on the campaign trail pause for thought. This year may have seen record levels of employment, but the next government needs to be prepared for the consequences of a rockier road ahead.”

Over in Germany, economic confidence has bounced back from its recent slump - an encouraging signal.

The ZEW Institute’s sentiment index has come in at -1, up from -23.5 in October. Although still in negative territory, it suggests investors are less gloomy.

ZEW reckons that the prospect of a Brexit deal and a breakthrough in the US-China rade war have boosted German investor sentiment.

ZEW president Achim Wambach said:

“Hope is growing that the political and economic environment will improve in the near future.”

Simon French, chief executive of Panmure Gordon, has a balanced take on today’s jobs report:

The drop in part-time workers has hit women workers harder than men (as they are more likely to be working part-time, jugging work and family commitments).

The ONS says:

The number of part-time workers fell by 164,000 to 8.54 million in Quarter 3 2019, while the number of full-time workers increased by 106,000 to 24.21 million.

The decline in part-time workers was driven by women (down 106,000 in the quarter) and the increase in full-time employment by men (up by 93,000 in the quarter).

ING: Young people and part-time workers hit

Young people and part time workers are bearing the brunt of the UK jobs slowdown, as these charts from ING show:

UK unemployment data
UK unemployment data

James Smith, ING’s Developed Markets Economist, says:

The recent fall in employment has been predominantly driven by 18-24 year-olds, and once that group is stripped out, jobs growth is still positive. A large chunk of the fall has also been led by part-time employees. It’s not clear whether these two factors are linked, but both can be reasonably volatile parts of the jobs data.

But with forward-looking hiring indicators deteriorating, and given the risk that Brexit uncertainty persists into 2020, there’s a clear risk the jobs market deteriorates further over coming months.”

Geraint Johnes, Professor of Economics at Lancaster University Management School, has spotted that the number of part-time workers has fallen very sharply over the summer.

More than 100,000 more workers were employed full-time over the latest three-month period than in the previous quarter. This increase is roughly evenly split between employees and self-employed workers. Set against this good news, however, is a very large decline in numbers of part-time workers – a fall of 160,000 in total.

Overall, therefore, the number of people in employment has fallen. This is accompanied by a rise in the numbers of people who are economically inactive – especially amongst 18-24 year olds. Meanwhile, unemployment has fallen by some 23,000 and the unemployment rate is back down to 3.8%.

IoD: Jobs market is under strain

Britain’s bosses are worried that the UK jobs market is under strain

Tej Parikh, chief economist at the Institute of Directors, says some firms are putting projects on hold due to political and economic uncertainty (thanks to Brexit and the general election).

Others are struggling to find qualified staff, he says.

“With so many in work there has been a lift to household incomes, which has supported the economy through a challenging period. However, businesses are now finding it harder to access the talent needed to fill openings, so jobs growth is expected to slow further.

Many firms are also putting recruitment plans on ice as wider projects and investments are bottled up by uncertainty. Vacancies are likely to continue falling.

The IoD also argues that wages will come under pressure:

“The pick-up in wage growth earlier this year has been a plus, but there is clearly a limit to how high pay packets can go. With many firms facing elevated costs and difficulties raising their productivity game, the margins to raise pay are eroding. A further acceleration in wages now looks unlikely.

TUC General Secretary Frances O’Grady is disappointed that wage growth has slowed in the last quarter.

Although wages (+3.6%) are rising faster than inflation (+1.7%), this doesn’t make up for falling real wages in recent years (see figure 4, here).

“Working families are thousands of pounds out of pocket after a decade of dismal pay growth. That is not right.

“The Conservatives have presided over the longest wage squeeze since Napoleonic times. They have nothing to boast about.

The TUC has calculated that the median employee is £14,278 worse off today than they would be had wages kept pace with inflation since 2008. In the same period, unsecured household debt has risen by a third to a record high of £14,177.

Here’s the Office for National Statistics’s take on today’s data:

“The employment rate is higher than a year ago, though broadly unchanged in recent months.

“Vacancies have seen their biggest annual fall since late 2009, but remain high by historical standards.

The number of EU nationals in work was very little changed on the year, with almost all the growth in overseas workers coming from non-EU nationals.”

EU and non-EU

UK unemployment: the key charts

Britain’s employment rate has dropped to 76%, from 76.1%, in the last quarter as the number of people in work fell by 58,000.

That’s still close to a record high, following a steady recovery since the financial crisis

UK unemployment data
UK unemployment data Photograph: ONS

But at 3.8%, the unemployment rate has dropped back to its lowest since the mid-1970s.

UK unemployment data
UK unemployment data Photograph: ONS

That’s because more people have become economically inactive - neither working nor looking for a job.

UK economic acivity
UK economic acivity Photograph: ONS

Wage growth has also reversed its recent gains, with average basic pay rising by 3.6%, down from 3.8% a month ago.

That means real earnings, adjusted for inflation, are also rising at a slower rate.

UK unemployment data

This should also set alarm bells ringing:

UK unemployment data

Biggest fall in vacancies since 2009

More bad news. The number of vacancies in the UK economy has fallen by 14,000 in the last quarter.

That’s the biggest quarterly decline since 2009, according to the ONS.

There are now 800,000 jobs waiting to be filled, down from 814,000 a month ago.

This further suggests the jobs market is cooling.

Vacancies hit a record high of 861,000 at the start of this year, but have been falling since.

Updated

In a blow to workers, wage growth has slowed.

Average earnings rose by 3.6% per annum in the July-September quarter, the Office for National Statistics reports (both including and excluding bonuses).

That’s down from 3.8% per year a month ago for basic pay, and 3.7% for total pay.

Updated

UK employment falls again

Newsflash: The number of people in work across the UK has fallen, in a sign that Britain’s labour market may be weakening.

The employment total fell by 58,000 in the three months to September, according to the latest Labour Market statistics.

According to Reuters data this is the biggest drop in employment in four years, taking the employment total down to 32,753m.

That follows a 56,000 fall in employment reported a month ago.

However, the unemployment total has also fallen by 23,000 to 1.306m in the July-September quarter, which drags the jobless rate down to 3.8%.

This suggests that more people have dropped out of the labour market, and stopped looking for work

More to follow!

Nearly 30% of European car exports go to the US at present, so the industry would obviously be relieved if Trump delays imposing a new 20% tariff.

But... pushing the decision back by six months also creates uncertainty, and another cliff edge dilemma next May.

Garry White of investment managers Charles Stanley calls it a ‘sword of Damocles’, which could drop unpleasantly on the industry...

Bluewater shopping centre, Kent.
Bluewater shopping centre, Kent. Photograph: Frantzesco Kangaris

Land Securities, which owns the Bluewater shopping centre in Kent, has slumped to a first-half loss, hit by a raft of store closures as retailers struggle against weaker consumer spending and a shift to online shopping.

The property firm posted a £147m loss for the six months to September, against a £42m profit a year earlier. Rental income at its retail division fell by £2m or 1.5% while offices fared better, up £3m or 2.5%. Shopping centres outside London are struggling in particular, where footfall was down 1.8%.

About 3.6% of the firm’s retail space stood empty, a slight improvement on the 4% recorded at the end of March, but there were more units in administration (1.4% against 0.9% in March).

The most recent high street failure is Mothercare, which is shutting all its UK shops after going into administration last week.

Chief executive Robert Noel said the rise in Company Voluntary Arrangements, which allow retailers to ditch under-performing stores, has hurt profits:

“The retail market continues to be challenged as retailers adapt to structural change, rising costs and a more cautious consumer … Limited demand for space and poor investor sentiment is impacting rental and capital values.

We have seen further high-profile CVAs and administrations in the period, notably Debenhams and Arcadia. Clearly, we are not immune from these trends but, where we have been hit by CVAs, our assets remain popular with occupiers and customers. And where stores have closed, we have had reasonable re-letting success - with more than half of units re-let or in solicitors’ hands as at 30 September.”

Updated

Mr Kipling French Fancies

Premier Foods shares are up 7.7% to 35.9p in early trading.

The company has enjoyed a boost to its profits from the relaunch of its classic range of Mr Kipling cakes. The new offerings are somewhat more upmarket -- After Dinner Mint Fancies; Apple, Pear & Custard Crumble Tarts and Chocolate, Caramel & Pecan slices

Premier also reported strong sales of Nissin noodles, and has launched a new plant-based range of snacks, called Plantastic, made from grains, fruit and vegetables, to tap into the trend for healthier eating.

Premier Foods, which makes a host of well-known brands such as Bisto gravy, Ambrosia puddings and Oxo cubes, posted a 5% rise in adjusted pretax profit to £31.7m for the six months to 28 September. It has also reduced its debt, by nearly £39m to £470.7m.

ITV gets World Cup boost

England’s centre Owen Farrell (R) holds the ball past South Africa’s scrum-half Faf de Klerk during the Japan 2019 Rugby World Cup final match.
England’s centre Owen Farrell (R) holds the ball past South Africa’s scrum-half Faf de Klerk during the Japan 2019 Rugby World Cup final match. Photograph: Charly Triballeau/AFP via Getty Images

Broadcaster ITV is the best-performing FTSE 100 share, up almost 3%, after it reported a rise in advertising revenue in the last quarter.

England’s rugby team can take some of the credit - their run to the World Cup final helped ITV to pull in more viewers (even if the final didn’t go as many hoped).

Markets rise ahead of Trump speech

This morning’s trade war optimism is helping to lift European markets.

Most of the main indices are higher, led by Germany’s DAX (+0.4%). Car makers, industrial groups and tech firms are all rallying.

European stock markets
European stock markets Photograph: Refinitiv

Neil Wilson of Markets.com says investors are bracing for Donald Trump’s speech tonight:

All eyes will on Donald Trump after markets close in Europe as the president is due to deliver a speech at the New York Economic Club later, expected at 17:00 GMT.

This poses all kinds of risks - on everything from China and trade to the Fed and impeachment. Markets will be on tenterhooks. The president’s speeches are akin to throwing a dart blindfolded.

We may get an update on planned US tariffs on EU autos, which are expected to be delayed for six months. The deadline for the president to kick this into the long grass is tomorrow.

Shares in European carmakers are rising in early trading.

Daimler (+1.25%), BMW (+1%) and Volkswagen (+0.7%) are all among the top risers in Frankfurt.

European Union officials are also quietly optimistic that Trump will resist triggering the car tariffs this week.

One told Reuters:

“We have a solid indication from the administration that there will not be tariffs on us this week.”

Introduction: Trump to delay EU car tariffs?

U.S. President Donald Trump.
U.S. President Donald Trump. Photograph: Yuri Gripas/Reuters

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

Fighting a war on multiple fronts is never easy -- you risk losing focus, fighting the wrong battles, and creating too many foes to tackle at once.

So it’s understandable that the US may be swaying away from escalating its trade dispute with Europe, as it tried to secure a win against China.

According to multiple sources, Donald Trump is reportedly planning to delay a planned hike on EU car imports. He has to decide by Wednesday whether to impose a 20% tariffs on vehicles and auto parts, or kick the decision down the road for another six months.

These tariffs were first threatened a year ago, as the two sides began a tit-for-tat trade spat which hit European steel and American peanut butter, whiskey and motorcycles.

Trump has already delayed these tariffs once. One source told Politico that the president is planning to announce another six-month delay:

That would avoid a new bruising dispute with one of the United States’ biggest trading partners, just as Trump is trying to put out another trade fire by striking an initial deal with China. But it would also set the stage for Trump to revisit the controversial trade issue in the throes of next year’s presidential campaign.

The person with familiar the decision cautioned there is always uncertainty surrounding Trump’s final determination when it comes to trades and tariffs. But barring some unforeseen development, the president is expected to announce another six-month delay, the person said.

Outgoing European Commission President Jean-Claude Juncker is also hopeful that Trump will resist escalating tensions between Washington and Brussels.

He told Germany’s Sueddeutsche Zeitung late last week:

“Trump is going to make some criticism, but there won’t be any auto tariffs.

He won’t do it. ... You are speaking to a fully informed man.”

Such a move would obviously boost European car makers, who have already been hurt by trade tensions and weakening demand in China.

It could also reassure markets, where investors are disappointed that the US-China negotiations over a Phase One trade deal are dragging on.

But predicting the president’s next move is often tricky. Donald Trump is due to speak at the Economic Club of New York later today, so we may hear more clues about his trade war strategy.

Also coming up today

Yesterday we learned that UK growth has fallen to a 10-year low, as Brexit uncertainty continues to hit investment and the global economy weakens.

Today we get the latest labour market report, which is expected to show that the UK employment total fell by around 94,000 in the last quarter. That would reinforce concerns that the jobs market is cooling.

Economists also predict that the unemployment rate will remain at 3.9%, close to a four-decades low, with wage growth pegged at 3.8%.

There may be drama at the High Court too, as the Royal Mail tries to block a planned strike that could disrupt Christmas deliveries and postal votes in next month’s general election.

The agenda

  • 9.30am GMT: UK unemployment data for July-September
  • 10am GMT: ZEW survey of eurozone economic confidence
  • 5pm GMT: President Donald Trump speaks at Economic Club of New York
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