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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

Bank of England chief economist hints at summer rate cut; Tesco CEO’s pay doubles to nearly £10m– as it happened

United Kingdom Unemployment United States Office for National Statistics Huw Pill Inflation
A job centre in east London.
A job centre in east London. Photograph: Daniel Leal/AFP/Getty Images

Closing summary

Time to wrap up

The chief executive of Britain’s largest supermarket, Tesco, more than doubled his pay package to nearly £10m last year.

Ken Murphy received £9.93m during Tesco’s last financial year, up from £4.44m a year earlier.

Much of the increase was due to a Performance Share Plan (PSP) payout of £4.91m.

Tesco said the PSP payout reflected “strong performance against stretching targets over a challenging period.”

But the High Pay Centre said Murphy’s huge pay packet illustrated how the UK economy serves the interests of the super rich at the expense of everybody else.

The Unite union accused Tesco of giving struggling workers a “slap in the face”.

Details of Murphy’s pay were released on a day when UK unemployment rose to 4.3%, as firms cut back on staff.

But regular pay, which strips out bonuses, was unchanged, recording growth of 6%, meaning real wages continued to grow.

The Bank of England’s chief economist Huw Pill suggested that the BoE may be able to consider cutting interest rates this summer.

He told an online presentation organised by the ICAEW, an accountancy body, that:

“I think it’s not unreasonable to believe that through the summer we will begin to see enough confidence in the decline in persistence that Bank Rate will come into consideration.”

The money markets suggest that there’s an even change of a cut, or no change, at the Bank’s June meeting.

Elsewhere today, Kremlin critic and anti-corruption campaigner Bill Browder has urged MPs to introduce a US-style law that would allow the government to confiscate frozen Russian assets to support military efforts in Ukraine.

Browder told the Treasury Committee that using around $300bn of frozen Russian assets to support Ukraine could “change the whole nature of the war”, and act as an insurance policy in case Donald Trump wins the US presidency and cuts support for Kyiv.

Browder also named refineries in India, Turkey and China which he claimed were processing Russian oil and selling refined products to the West.

US president, Joe Biden, has announced a 100% tariff on Chinese-made electric vehicles as part of a package of measures designed to protect US manufacturers from cheap imports.

The global carmaker Stellantis is to sell cheap electric cars made by its Chinese partner Leapmotor in Europe, including the UK, as it criticised Joe Biden’s decision to impose a 100% tariff on Chinese EVs imported to the US.

Spending on the NHS in England has risen less quickly than the Conservatives promised at the last election despite the extra demand created by the pandemic and record waiting lists, a leading thinktank has said.

Anglo American plans to sell the diamond business De Beers as part of a sweeping plan to break up the company to defend it against a £34bn takeover plot by its rival BHP.

But there are concerns that cuts to spending at its Woodsmith fertilizer mine in the North York Moors National Park could lead to job losses.

Vodafone has said its turnaround plan is starting to show results as Germany, its largest business, returned to growth last year after the sale of its Italian and Spanish operations.

Ofgem could allow energy suppliers to once more vie for new customers by offering them cheaper deals than existing policyholders receive, under proposals to reignite competition in the market.

Updated

Ken Murphy’s pay packet isn’t the only thing that has doubled.

Over on Wall Street, the meme stock fever is in full cry.

Shares in electronics retailer GameStop jumped by around 100%, before sliding a little, while cinema chain AMC Entertainment are up 90% in early New York trading.

Retail traders’ interest in GameStop, the struggling video games chain, has been reignited by the re-emergence of an influencer known as Roaring Kitty.

Earlier this week Keith Gill, the influencer known as Roaring Kitty, posted on X for the first time since the height of the meme stock frenzy in 2021. He shared a sketch of a gamer leaning forward, as if things were getting serious – and followed up with a string of clips from movies and TV shows.

Three years ago Gill’s videos on YouTube, and posts on Reddit, where he is known as DeepFuckingValue, placed him at the front of an army of meme-toting day traders who tried to mount a rebellion against Wall Street – and the financial titans dominating the market.

More here.

Tesco CEO Ken Murphy’s £10m pay packet for last year shows that the UK’s economic model serves the super-rich at the expense of everybody else, says Luke Hildyard, Executive Director of the High Pay Centre.

Hildyard is concerned by the “extreme disparity” between the CEO’s pay and the pay of Tesco’s workers.

Murphy’s pay is 447 times greater than a full time Tesco worker at the lower quartile of the workforce and 431 times greater than the median Tesco employee, as this chart from today’s annual report shows:

Hildyard says this is one of the worst pay gaps on record:

“This is the third highest gap between the CEO of any firm and their typical employee recorded since pay ratio reporting began five years ago.

You couldn’t really get a better indicator of how the UK economy serves the interests of the super rich at the expense of everybody else than this - a multi-millionaire Chief Executive trousering another £10 million while their customers endure major price rises and their employees have to get by on less than a quarter of a percent of what the CEO takes home.”

US PPI inflation hotter than hoped

Back in the economics world, US producer price inflation was hotter than expected last month.

US services companies and manufacturers raised the cost of their goods and services by 0.5% in April, the US Bureau of Labor Statistics reports, following a 0.1% drop in March.

This may potentially discourage the US Federal Reserve from considering cuts to interest rates soon, given concerns that inflation is looking sticky.

Services prices rose by 0.6% in the month, while goods prices were up 0.4%.

On an annual basis, PPI inflation rose to 2.2% for the 12 months to April, up from 1.8% in the year to March. That’s the highest annual reading since April 2023, when PPI was 2.3%/year.

Paul Ashworth, chief North America economist at Capital Economics, explains:

The bigger-than-expected 0.5% m/m increases in both all items and core final demand producer prices in April were mainly due to downward revisions to earlier months, with the 0.2% m/m gains in March both revised to 0.1% declines.

As a result, the annual rate of all items final demand PPI inflation only edged up to 2.2%, from 2.1%. That modest increase in the annual headline rate was mainly due to a 5.4% increase in gasoline prices, however, which, with crude oil prices slumping more recently, should be more than reversed in May.

Ken Murphy has surged near to the top of the list of best paid FTSE 100 CEOs, with his £10m pay packet for last year.

He’s not at the top, though.

AstraZeneca’s chief executive, Pascal Soriot, received a pay package of nearly £17m last year, and could be paid £18.7m this year.

Another pharmaceuticals boss, Emma Walmsley of GlaxoSmithKline, received a 50% rise last year, taking her annual pay packet to £12.7m.

Back in March, The Observer reported that median pay for the companies listed on the pan-European Stoxx 600 index, which includes the biggest UK companies, was €3.5m (£2.9m) in 2022.

Ken Murphy actually only received 95% of his potential annual bonus for last year.

He missed out on the maximum award, because a target of reducing food waste by 47% was missed.

That meant Murphy received £3.377m, out of a maximum of £3.555m (250% of his basic pay).

Ken Murphy’s whopping pay packet of £9.9m for last year works out at an equally jaw-dropping £190,000 per week.

That’s the amount you might pay a top-class Premiership footballer for a week – or more than five times the annual pay for an NHS nurse.

Can anyone, really, be worth £10m per year, just for running a supermarket?

The Sunday Times reported last month that some analysts argue the £10 million man is worth every penny, after steering Tesco through a pandemic, then raised its market share during a cost of living crisis.

Richard Hyman, of Thought Provoking Consulting, told them:

“He’s done a terrific job. Ken has unashamedly focused on the thing Tesco is really good at: mass market grocery retailing.

Tesco’s supermarkets have fewer bells and whistles these days, but they are far more reliable on product availability, price and value… and that’s fundamental.”

Updated

Tesco CEO's pay doubles to nearly £10m

Tesco’s CEO Ken Murphy needn’t fret about the cost of living squeeze, it seems, after more than doubling his pay last year to almost £10m.

Murphy was paid £9.9m in the last financial year, up from £4.4m in 2022/2023.

Tesco’s 2024 annual report, just released, shows that Murphy’s basic pay rose by 3% to £1.41m. He also received an annual bonus of £3.38m, up from £2.73m last year.

Murphy’s pay packet was further swelled by a £4.91m payout from Tesco’s Performance Share Plan (PSP). This award is paid in Tesco shares, and are based on performance since 2021.

Britain’s largest supermarket chain says:

The significant year-on-year increase in remuneration primarily reflects the first vesting from these awards, which themselves reflect strong performance against stretching targets over a challenging period.

That challenging period covers a time in which many familes struggled to put food on the table, as grocery and energy prices soared – which means Murphy’s pay packet may prove controversial.

CFO Imran Nawaz’s annual remuneration also more than doubled, to £4.95m from £2.27m.

Tesco says:

A large proportion of the total package has been achieved thanks to both Ken Murphy and Imran Nawaz achieving stretching targets in a highly competitive sector and working to create value for customers, colleagues, suppliers, communities and shareholders.

Tesco adds that it “remains committed to a competitive and fair reward package for all colleagues”, and spent £300m on a pay rise for its hourly-paid staff.

Updated

In the economic world, there are glimmers of optimism in America and the eurozone today.

US small-business confidence increased last month, despite firms struggling with a shortage of workers, according to the National Federation of Independent Business (NFIB).

NFIB’s Small Business Optimism Index rose by 1.2 points to 89.7 for April, having slid to an 11-year low in March.

Encouragingly for consumers, the share of owners planning to raise prices was the smallest in a year

Bill Dunkelberg, NFIB chief economist, says:

“Cost pressures remain the top issue for small business owners, including historically high levels of owners raising compensation to keep and attract employees.”

Meanwhile in Germany, investor morale has improved by more than expected in May.

The ZEW economic research institute’s economic sentiment index jumped to 47.1 points from 42.9 points in April, higher than expected.

Bill Browder names refineries processing Russian oil

Bill Browder has also named the oil refineries which are taking Russian oil, refining it, and setting the products to the West.

Browder suggests that such refineries could be sanctioned, or legislation could be passed to block sales from these sites.

He then names them on the record, for the Treasury Committee.

In India, they are the Vadinar Refinery, which is 49% owned by Russia’s state oil company, Rosneft, the Jamnagar Refinery in the Gulf of Kutch, on India’s western coast, and state-owned companies Bharat Petroleum and Hindustan Petroleum.

In Turkey, he names STAR Rafineri which stuck a deal with Russia’s Lukoil.

And in China, he names Sinopec Group and CNOOC (China National Offshore Oil Corporation).

Browder adds:

Those are alll companies who buy Russian oil. When we talk about India, China and Turkey we’re talking about specific companies.

We don’t need to sanction India, China and Turkey, we can just go after the companies that are buying the oil.

He urges MPs to put these names into their report into Russian sanctions, as this would add to the pressure on these companies. If Russia can’t find a market for its oil, then the price will go down, and Moscow will have less money to fund its war with Ukraine.

Updated

Browder: UK should pass REPO Act to ease confiscation of Russian assets

Bill Browder then urges MPs to copy the US, and pass a law to remove any ambiguity over whether frozen Russian assets can be confiscated, and used to fund Ukraine.

That REPO Act was passed with the $61bn aid package which was approved by Congress last month.

Browder tells the Treasury Committee today:

What I would suggest is done here is some version of the REPO Act, where – to the extent that there’s any legal concern – you legislate away that legal concern so that it can be properly done here.

If the US and the UK both approved such legislation, it would put more pressure on the European Union to “do the right thing in the end”, Browder explains.

The European Union’s proposal of using windfall profits from frozen Russian assets to finance arms supplies to Kyiv, rather than the assets themselves, is “a typical EU bad compromise”, he adds.

Browder argues there’s no difference between taking the profits and simply taking all the money, so the EU’s plan is a “fudge” that will prolong the inevitable.

Browder: Using Russian assets to fund Ukraine would "change whole nature of the war"

Western governments should use the seized Russian assets they control to fund the war in Ukraine, as an ‘insurance policy’ in case Donald Trump wins the US presidential election, MPs have been told.

Financier and political activist Bill Browder explained to the Treasury Committee this morning that it would “change the whole nature of the war” if the West were to confiscate $300bn of assets from Russia.

Browder, who set up the Magnitsky Campaign after his lawyer, Sergei Magnitsky, died in custody in Russia in 2009, explains to MPs that the Russia-Ukraine conflict is a “resource war”.

Currently Russia has more resources than Ukraine, and Putin is “banking” on the West having less appetite for the war than him, as it drags on, Browder explains.

Browder cites the delays getting Ukraine funding approved by the US House of Representatives this year, saying:

If this money were to be confiscated, it is five times the $65bn that the US had been dragging their feet on.

It would completely change the situation… in a context where we’re almost two and a half years into this war, and whether we like it or not, some of our allies are going to be less likely to fund this war.

Browder says he is “particularly concerned” about what might happen in the US, where Donald Trump is leading in the swing states. Trump has made it very clear that he would end the war in 24 hours – by stopping funding Ukraine.

Currently, the US provides half the funding for Ukraine, so either Ukraine loses war or “we have to double down”, explains Browder.

This money, this three hundred billion, would solve that problem. It would basically be an insurance policy against that problem.

Britain has been ramping up pressure on western governments to use frozen Russian assets to help rebuild Ukraine’s war-shattered economy.

In January, foreign secretary David Cameron told the World Economic Forum in Davos that there were legal, moral and political justifications for action.

The EU, though, is favouring using only the profits from those assets to help Ukraine.

Browder adds that he doesn’t think confiscating Russian assets would have any impact on the markets, rejecting claims that it would destabilise the markets.

He also suggests it could deter China from attacking Taiwan, telling MPs:

It would sent a message that if you launch an unprovoked war of aggression, you’re likely to have your foreign exchange reserves confiscated.

He adds that the cost of supporting Ukraine will fall on taxpayers, unless politicians take the plunge and use Russian frozen assets instead.

Updated

Bill Browder: Sanctions are crippling Russia, but oil is a "big, big" loophole

Anti-corruption campaigner and Kremlin critic Bill Browder has told MPs not to be fooled by claims from Moscow that sanctions aren’t working.

Testifying to the Treasury committee this morning, Browder explains that president Putin has claimed several times that sanctions introduced after the invasion of Ukriane aren’t working.

Putin argues that the Russian economy is doing well, so the West should stop hurting themselves with sanctions on trade with Russia.

Browder, though, smells a rat, telling MPs:

Sanctions are crippling Russia.

The numbers that you receive about the ‘success’ of the Russian economy….the Russian state statistics committee produces those numbers. The Russians lie in every other area, I don’t see any reason why we should believe those numbers coming out of Russia.

[Reminder: Rosstat has reported that Russia’s economy contracted by just 1.2% in 2022, the first year of the Ukraine war].

Browder reminds MPs of the measures taken against Ukraine:

  • Western governments froze around $300bn of central bank reserves the week after the Ukraine war started

  • The UK have sanctioned 57 of the 98 oligarchs who are listed as influencial by the US, meaning their money is effectively imobilised.

  • The foreign borrowing of Russian companies and government has been curtailed

  • 1,500 Western companies have retreated from Russia

  • There’s been an $80bn swing in foreign direct investment, from +$40bn of FDI before war, to -$40bn now.

But the “big, big loophole” is the sale of oil, Browder continues; oil which Russia used to sell to the West is now being sold to India, China and Turkey.

This presents two problems.

First, Russia continues to get a lot of money from that oil – beween half a billion and a billion dollars per day.

Second, the oil is being processed in refineries in India, China and Turkey, and returned to the West as refined oil products.

Browder estimates that $23bn of refined oil products is being sold back to the EU, and the UK bought $2.2bn of that refined product last year.

He tells the Treasury Committee:

As long as Russia can sell the oil, Russia can use that hard currency to buy weapons, and they can use those weapons to kill Ukrainians.

This means the West are funding both sides of the war, Browder explains, meaning something has to give.

What Putin is hoping is going to give, is that we’re going to run out of patience the fund the Ukrainians.

Updated

China might feel like a victim of heavy-handed US action today, but shouldn’t think the 100% tariffs on its electric cars are anything new, my colleague Phillip Inman explains.

In the 1980s president Ronald Reagan imposed 100% tariffs on billions of pounds (in today’s money) of Japanese imports after years of beligerent protests from an increasingly protectionist Washington administration.

Japanese car makers reacted by relocating factories inside the US, while the Tokyo government bottled up whatever anger it had to preserve good relations with its military protector.

Economic historians have noted that it mainly benefited Korean car makers rather than US car workers. Korean firms like Hyundai began to make headway in the US market under the radar.

China has found a way round existing tariffs by sending goods via Mexico, which has seen a boom in exports to the US. So a clampdown on this new trade route is possible in the near future.

The sweeping tariffs on Chinese electrical goods announced by the White JHouse a few minutes ago will impact around $18bn of imports, Bloomberg has calculated.

Biden hikes tariffs on Chinese EV cars, chips and solar cells

NEWSFLASH: The US president, Joe Biden, has announced a 100% tariff on Chinese-made electric vehicles as part of a package of measures designed to protect US manufacturers from cheap imports.

In a move that is likely to inflame trade tensions between the world’s two biggest economies, the White House said it was imposing more stringent curbs on Chinese goods worth $18bn.

Sources said the move followed a four-year review and was a preventive measure designed to stop cheap subsidised Chinese goods flooding the US market and stifling the growth of the American green technology sector.

As well as a tariff increase from 25% to 100% on EVs, levies will rise from 7.5% to 25% on lithium batteries, from zero to 25% on critical minerals, from 25% to 50% on solar cells, and from 25% to 50% on semiconductors.

Here’s the full story:

Anglo American to slash investment in Woodsmith fertiliser mine amid break-up plan

There are fears of job cuts at the Woodsmith fertilizer mine in the North York Moors National Park, as owner Anglo American announces details of a plan to break itself up.

Fresh from rejecting a takeover approach from rival BHP Group, Anglo has revealed a series of sweeping changes this morning, which will refocus its on copper and premium iron.

The plan includes

  1. Demerging its Anglo American Platinum division – something which BHP pushed for its takeover proposal

  2. Selling or demerging its diamond operation, De Beers

  3. Selling its Steelmaking Coal operations

  4. Slowing the development of the Woodsmith project to support Anglo American’s balance sheet deleveraging.

Anglo is proposing to slash capital expenditure at Woodsmith to zero in 2026, down from $200m in 2025.

Simon Clarke, Conservative MP for Middlesbrough South and East Cleveland, fears the plan will “clearly have significant implications for the dedicated workforce” at Woodsmith.

Updated

Full story: UK real pay grows at fastest rate in two years

The level of real pay for UK workers is rising at its fastest rate in more than two years despite a cooling of the labour market that has led to rising unemployment and falling job vacancies, the latest official figures show.

Fresh data from the Office for National Statistics showed the mild recession in the second half of 2023 has had an impact on demand for workers but has been slower to affect wages.

The ONS said unemployment rose by 166,000 between the final three months of 2023 and the first three months of 2024, pushing up the jobless rate from 3.8% to 4.3%.

More here.

BoE's Pill: Not unreasonable that we could consider rate cuts this summer

The Bank of England’s chief economist has said it is “not unreasonable” to think the central bank could consider cutting interest rates over the summer, Reuters reports.

This has knocked the pound, which is down almost half a cent this morning at $1.252.

Huw Pill told an online presentation organised by accountancy body ICAEW that if inflation continues to look less persistent, the Bank could consider lowering Bank Rate.

He says:

“I think it’s not unreasonable to believe that through the summer we will begin to see enough confidence in the decline in persistence that Bank Rate will come into consideration.”

Pill also explained that the UK’s labour market remains tight by historical standards, despite this morning’s rise in unemployment and the gradual slowdown in pay growth.

He said:

“There has been an easing of the labour market but it still remains pretty tight by historical standards.”

Pill also pointed to the slowdown in private sector pay growth in this morning’s data (to 5.9%, see here), saying:

“We actually got some additional data this morning that would be consistent with a small additional decline in the first quarter.”

PIll was one of seven MPC members who voted to keep interest rates on hold last week, while just two policymakers voted to cut.

Following his comments today, the momney markets now indicate there is a 53% chance of a rate cut at the BoE’s next meeting in June, up from around 50% earlier today.

Updated

New version of Chat-GPT tells bedtime stories, translates and flirts

OpenAI has shaken up the artificial intelligence world by releasing their latest AI chatbot,

OpenAI say that GPT-4o – the “o” stands for “omni” – is a step towards much more natural human-computer interaction.

It brings the faster, more accurate GPT-4 AI model to free users (previously you had to pay), and can accept any combination of text, audio, and images as input.

And demonstrations show just how powerful the new chatbot is.

In one demonstration, GPT-4o created a bedtime story about love and robots, telling it in a variety of different emotional and vocal inflections.

Another demonstrations showed it translating in real time between English and Spanish – an example of the way that AI could shake up the employment sector…..

… it can do English <-> Italian translations too!

GPT-4o has also been designed to sound chatty and sometimes even flirtatious, as the BBC’s technology editor, Zoe Kleinman, explains here:

Using a warm American female voice, it greeted its prompters by asking them how they were doing. When paid a compliment, it responded: “Stop it, you’re making me blush!”.

It wasn’t perfect – at one point it mistook the smiling man for a wooden surface, and it started to solve an equation that it hadn’t yet been shown. This unintentionally demonstrated that there’s still some way to go before the glitches and hallucinations which make chatbots unreliable and potentially unsafe, can be ironed out.

Labour market hit by economic slowdown

The UK’s economic slowdown last year has caused Britain’s jobs recovery to falter, explains the Resolution Foundation this morning.

They point out that the post-pandemic workforce has shrunk by the equivalent of one million workers, compared to before Covid-19.

But the slowdown hasn’t yet fed through into pay packets, with real wages now growing at their fastest in rate in over two years, Resolution points out.

Nye Cominetti, principal economist at the Resolution Foundation, says:

“Britain’s jobs recovery continues to falter, with the workforce shrinking by the equivalent of one million workers since pre-pandemic times. This worrying employment fall shows the damage that an economic slowdown can cause.

“The news for those in work is more positive however, with real wages growing almost as much over the past 12 months as they did in the 16 years prior to this.

“The big question is whether the UK’s recent economic recovery will boost employment and raise output per worker, which will be needed to sustain its mini pay recovery.”

Jonathan Portes, professor of economics at King’s College London, has analysed today’s economic inactivity data:

Kathleen Brooks, research director at XTB, also believes today’s jobs data could support a Bank of England rate cut in June.

Brooks explains:

The uptick in the unemployment rate is garnering a lot of attention this morning. It rose to 4.3%, the highest level since July last year, and above the average unemployment rate of the last 5 years, which is 4.2%.

However, this is still a very low level, and for the last three years, the unemployment rate has been in an approximate range between 3.5% - 4.5%.

This supports the BOE view that the UK’s economy is 1, resilient against higher interest rates, and 2, that disinflation is occurring while there is still virtually full employment. Thus, the rise in the unemployment rate to the top of the medium term range, is not a cause for concern, but it could support a rate cut from the BOE next month.

June interest rate cut a coin toss

The money markets are suggesting there is an evens chance that the Bank of England starts cutting interest rates in June.

There is currently a 50.2% chance of a cut next month, LSEG data shows, and a 49.8% chance that the BoE leaves interest rates on hold….

James Smith, developed markets economist at ING, says the cooling UK jobs market bolsters the chances of near-term rate cut. He agrees that “it’s looking pretty 50-50 right now” between June and August for the first rate cut.

Today’s jobs report shows there are now almost 9.4 million people who are economically inactive (neither in work, nor looking for a job).

Many of these people are keen to work, though, points out Stephen Evans, chief executive at Learning and Work Institute:

“The labour market continues to ease with employment and vacancies down. The number of people economically inactive due to long-term sickness is up 700,000 since the pandemic.

But 1.7 million people who are economically inactive say they would like a job. The answer isn’t further tightening benefit eligibility or focusing on a so-called ‘sick note culture’; it’s widening and improving help to find work.”

Charts: The latest UK employment indicators

Here are the key charts from today’s labour market report, showing the state of the UK jobs market:

Updated

Wages rose faster in the public sector than the private sector in the first quarter of the year.

Today’s jobs report shows that regular earnings (ex bonuses) in the public sector grew by 6.3% in the January-March quarter

But in the private sector, basic pay grew by 5.9% – the lowest since April-June last year.

Sanjay Raja, chief UK economist at Deutsche Bank, says:

The UK labour market continues to show signs of cooling – which should spell good news for the MPC. Private sector regular pay growth – while still elevated – came down a little more than the Bank of England was expecting at 5.9% (3m/YoY).

While we expect wage growth to remain sticky through the April period given the large 10% hike to the National Living Wage, this will give the MPC some confidence that data outturns are broadly in line with their own expectations.

Updated

Digging into today’s pay data, we can see that earnings rose fastest in manufacturing, and finance and business services – with regular pay (ex bonuses) up 6.8% per year in both sectors in January-March.

The construction sector saw the smallest annual regular pay growth across sectors, at 2.6% (activity fell in this sector in the last quarter).

Updated

IES: Very disappointing jobs data

Today’s jobs data is “very disappointing again”, warns Tony Wilson, Director at the Institute for Employment Studies.

Wilson points out that there are now 900,000 more people out of work than before the pandemic began, with virtually all of this due to higher economic inactivity.

He says:

There appear to be three key reasons for this: fewer older people coming back to work, more young people in education or out of work, and more people off with long-term health conditions across all ages.

Last month, Rishi Sunak claimed Britain is suffering from a “sicknote culture”, and announced a trial under which “work and health professionals” rather than GPs would issue fit notes.

However, UK workers take fewer sick days than those in France, Germany or the US.

Wilson explains:

However for all the talk about this being driven by a ‘sicknote culture’, the reality is that the UK has among the lowest rates of sickness absence in the world, while our analysis shows that the growth in ill health is being driven primarily by fewer people with health conditions coming back to work rather than more people leaving.

So we need to do far more and better to make our employment services more accessible, inclusive and supportive, rather than just threatening to change the rules or cut people’s benefits.”

TUC: UK jobs market is “rapidly deteriorating”

The TUC are also concerned that the jobs market is weakening.

TUC General Secretary Paul Nowak says:

“The Tories are presiding over a rapidly deteriorating jobs market.

“Unemployment and economic inactivity are shooting up. Over a million people are trapped on zero-hours contracts. And real wages are still worth less than in 2008.

“Forget ‘green shoots’ - everywhere you look the Conservatives are failing working people.

“Our country is crying out for a proper economic plan for jobs and growth to make sure household incomes can recover and everyone is secure at work.

“And our NHS desperately needs investment to get waiting lists back down. When people can access treatment faster, they will return to work sooner.”

Labour: Things are just getting worse

Alison McGovern MP, Labour’s acting shadow Work and Pensions Secretary, says today’s jobs report shows things are “just getting worse” under the current government.

McGovern also blames high NHS waiting lists for the jump in people who are now economically inactive, explaining:

“The morning after Rishi Sunak told us his plan was working, these damning new figures prove that things are just getting worse: employment down, economic inactivity up and unemployment rising.

“It’s no wonder there are now a record number of people locked out of work due to long-term sickness, given NHS waiting lists are spiralling and the Tories have pushed our NHS to its knees.

“It’s Labour who have the plan to get Britain working by driving down waiting lists, reforming job centres, making work pay and supporting people into good jobs across every part of the country. Change with Labour can’t come soon enough.”

Weakening labour market could prompt interest rate cut

The UK’s weakening labour market is a “harbinger of interest rate cuts”, says Yael Selfin, chief economist at KPMG UK.

Selfin says other indicators have also shown a “gradual deterioration in the labour market”.

That could encourage the Bank of England to consider cutting interest rates – if it also sees signs that pay rises are slowing.

Selfin explains:

“There were signs of some increased momentum in regular pay, with wage growth rising across a range of sectors in March. Consumer-facing services such as hospitality, where vacancies remain high and workers are more likely to benefit from the rise in the National Living Wage, could see continued pressure this summer. However, we expect overall headline wage growth to slow in the coming months on the back of weaker hiring activity.

“Next month will be key in terms of pay data as it will provide initial evidence of the impact of April’s National Living Wage increase. If it comes in line with our expectations of only a modest boost, and sufficient to keep annual pay growth on a downward trajectory, this could ignite more dovish sentiment on the MPC ahead of their June vote.”

The increase in economic inactivity in the latest quarter was largely because of those inactive because they were temporarily sick, long-term sick, or retired, the ONS says.

Government reaction

Chancellor of the Exchequer Jeremy Hunt is cheered that real wages are continuing to rise, saying:

“This is the 10th month in a row that wages have risen faster than inflation which will help with the cost of living pressures on families.

And while we are dealing with some challenges in our labour supply, including pandemic impacts, as our reforms on childcare, pensions tax reform and welfare come online I am confident we will start to increase the number of people in work.”

Secretary of State for Work and Pensions, Mel Stride MP, says:

“We are leaving no stone unturned to get people back to work, rolling out the most radical changes to welfare in a generation including reforming how we assess someone’s capability to work, overhauling the fit note process and helping over a million people through our £2.5bn Back to Work Plan.

We’ll always be on the side of hardworking families and with real wages still rising, alongside tax cuts and the huge boost to the National Living Wage, we are incentivising work over welfare as we build a strong economy where everyone has a brighter future.”

Unemployment; the regional picture

The ONS has also published some neat regional data, showing the labour market across the UK.

Here’s the details:

  • The highest employment rate estimate in the UK was in the South East (78.6%) and the lowest was in the North East (69.1%), for the three months ending March 2024.

  • Northern Ireland saw the largest increase in the employment rate compared with the same period the previous year, increasing by 1.0 percentage point, with the North East seeing the largest decrease of 3.5 percentage points.

  • The highest unemployment rate estimate in the UK was in the East Midlands (5.6%) and the lowest was in Northern Ireland (2.1%), for the three months ending March 2024.

  • The North West had the largest increase in the unemployment rate compared with the same period the previous year, increasing by 2.0 percentage points, with Wales seeing the largest decrease of 1.2 percentage points.

  • The highest economic inactivity rate estimate in the UK was in Wales (28.0%) and the lowest was in the South East (18.2%), for the three months ending March 2024.

  • The North East saw the largest increase in the economic inactivity rate compared with the same period the previous year, up 3.9 percentage points, with the Northern Ireland seeing the largest decrease of 0.8 percentage points.

UK payrolls estimated to have fallen in April

The number of people on UK company payrolls also appears to have fallen last month.

The ONS estimates that payrolled employment decreased by 85,000 employees in April when compared with March.

However, the statistics office says we should treat this as a provisional estimate. And indeed, March’s payroll data has been revised higher this morning – from a decrease of 67,000 to a decrease of 5,000.

On an annual basis, there are 129,000 more employees on payrolls than in April 2023; this is driven by a 170,000 increase in employees in the health and social work sector.

ONS: Seeing tentative signs that the jobs market is cooling

Today’s labour market report shows some signs tht the jobs market is cooling, say ONS director of economic statistics Liz McKeown:

“We continue to see tentative signs that the jobs market is cooling, with both employment from our household survey and the number of workers on payroll showing falls in the latest periods.

“At the same time the steady decline in the number of job vacancies has continued for a twenty-second consecutive month, although numbers remain above pre-pandemic levels. With unemployment also increasing, the number of unemployed people per vacancy has continued to rise, approaching levels seen before the onset of COVID-19.

“Earnings growth in cash terms remains high, with the recent falls in the rate now levelling off while, with inflation falling, real pay growth remains at its highest level in well over two years.”

Introduction: UK unemployment rate rises, but wages still strong

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

Britain’s unemployment rate has risen as companies cut back on hiring, and more people drop out of the labour market, often due to ill health.

The latest UK labour market statistics, just released this morning, show that the jobless rate has risen to 4.3% in the first quarter of this year, up from 4.2% a month ago and 3.8% in the previous quarter.

That’s the highest unemployment rate in nearly a year, since March-May 2023.

Another 166,000 people become unemployed in the quarter, taking the total out of work and looking for a job to 1.486m.

The number of people in employment dropped by 178,000 – another signal that the labour market is cooling – taking the total in work to just below 33 million.

Vacancies fell too: down by 26,000 in the three months to April, to 898,000.

In another worrying sign, the UK’s economic inactivity rate jumped to 22.1% in January to March, up from 21.9% in the final three months of 2023. That highlights the rise in people leaving the workforce – perhaps for illness, or due to caring responsibilities.

But pay growth remained strong – which may disappoint the Bank of England as it looks for signs that inflationary pressures are easing.

Regular earnings (excluding bonuses) rose by 6.0% in the last year, while total pay (including bonuses) rose 5.7% – with both readings unchanged compared with last month.

This means that real wages continue to grow, with earnings rising faster than CPI inflation.

The ONS says:

Using CPI real earnings, in January to March 2024, total pay was 2.1%. Growth was last higher in July to September 2021, when it was 3.0%.

Regular pay was 2.4%; growth was last higher in June to August 2021, when it was 3.4%.

Also coming up today

Later this morning we’ll hear from BoE chief economist Huw Pill, one of the monetary policy committee members who voted to leave interest rates on hold last week.

UK farmers are heading to Downing Street to meet PM Rishi Sunak for the second Farm to Fork summit, to discuss the challenges in the farming industry.

Global investors are bracing for the latest US Producer Price Index (PPI) data, which will show how quickly America’s manufacturers and services companies raised their prices last month.

The PPI report could reinforce, or ease, concerns that US inflation is looking sticks.

Stephen Innes, managing partner at SPI Asset Management, explains:

If this month’s PPI data doesn’t show a decline, there is potential for rates to drift higher, which could lead to a slide in stocks.

And in Miami, mining executives have gathered for the Bank of America Global Metals, Mining & Steel Conference 2024. That includes the CEOs of BHP Group and Anglo American, who are locked in a takeaover tussle after Anglo rejected BHP’s second takeover bid.

The agenda

  • 7am BST: UK labour market report

  • 8.30am BST: Bank of England chief economist Huw Pill speaks at the Institute of Chartered Accountants in England and Wales Regions economic summit

  • 9.30am BST: UK productivity estimates for Q1 2024

  • 10am BST: ZEW institute index of eurozone economic sentiment

  • 11am BST: NFIB index of small business optimism

  • 1.30pm BST: US PPI index of producer price inflation

  • 3pm BST: Fed chair Jerome Powell speaks at the Foreign Bankers’ Association AGM in Amsterdam

Updated

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