UK pay squeeze is ending as wage growth accelerates – business live

The dollar has dipped ahead of the Federal Reserve meeting, despite the prospect of a rate rise announcement. Connor Campbell, financial analyst at Spreadex, said:

In a move that surprised no-one the Dow Jones was incredibly reticent to do much after the bell rang on Wall Street, as investors eye the month’s Fed meeting.

The Dow dipped 0.1% this Wednesday; enough of a drop to suggest some pre-Fed fretting, but nothing to really tip its hand as to what it’s are expecting from the March statement. The dollar was more interesting in that regard. The greenback fell half a percent against the pound, 0.4% against the euro and 0.2% the yen, hinting that investors are perhaps a tad worried that Jerome Powell, in his first outing as the central bank’s chief, won’t be as hawkish as they want.

Interestingly the questions surrounding the meeting are less about what the Fed will do, but more about how they do it. At this point a rate rise seems almost guaranteed, a move that would take the benchmark interest rate to 1.75%. What is less certain are how many interest rate increases will follow throughout 2018, namely whether Powell will pull the trigger a further 2 or 3 times after his debut hike.

More signs of strength in the US economy ahead of the Federal Reserve rate decision.

Home sales jumped 3% in February to a seasonally adjusted annual rate of 5.54 units, according to the National Association of Realtors. Analysts has expected a rise of just 0.5%. But there is a shortage of available homes which is pushing up prices and helping to price first time buyers out of the market. NAR chief economist Lawrence Yun said sales were uneven across the country but did increase nicely overall:

A big jump in existing sales in the South and West last month helped the housing market recover from a two-month sales slump,. The very healthy US economy and labor market are creating a sizeable interest in buying a home in early 2018. However, even as seasonal inventory gains helped boost sales last month, home prices – especially in the West – shot up considerably. Affordability continues to be a pressing issue because new and existing housing supply is still severely subpar.

Meanwhile Facebook shares are down another 2.5% at the open, in the wake of the Cambridge Analytica controversy.

Here is our latest story:

The jump in UK wage growth means interest rates may rise soon, argues our economics editor Larry Elliott.

He writes:

Higher interest rates from the Bank of England have moved a decisive step closer after the latest official figures showed earnings growing at their fastest rate in more than two years.

The latest snapshot of the labour market from the Office for National Statisticsshowed that a record high level of employment and a drift from part-time to full-time work pushed up wages in the three months ending in January.

With inflation falling, the ONS said the squeeze on living standards that had dampened consumer spending over the past year had come to an end if bonuses were included in the yardstick used to calculate earnings.

Threadneedle Street’s monetary policy committee is meeting to discuss interest rates this week and the prospect of an increase in borrowing costs pushed up the pound on foreign exchanges. An increase in May is thought more likely than one this week….

More here:

Over in parliament, the prime minister has hailed today’s jobs figures.

Theresa May points out that employment is at a joint record high, the unemployment rate hasn’t been lower since 1975, and economic inactivity is at a record low.

No mention of the fact that the jobless total did rise in the last quarter, though…

Dr Carole Easton, chief executive of Young Women’s Trust, is concerned that younger female workers aren’t getting enough help to join the jobs market.

She points out that unemployment among women aged 16-24 rose by 21,000 in the three months to January. That means 151,000 young women are now unemployed and a further 340,000 young women are economically inactive and not in full-time education.

Dr Easton says young people need help to get the right skills, and should also benefit from the National Living Wage (which only applies to those over-25s today).

“21,000 more young women are unemployed, meaning nearly half a million are out of work. The Government must help young women into jobs to benefit individuals, businesses and the economy.

“Young women are telling us they want to work but they are getting shut out of the jobs market by employer discrimination, low pay and unaffordable childcare.

Interestingly, the number of people in work and the number counted as unemployment in Britain both rose in the last quarter.

You might expect them to move inversely – but instead, there was a fall in the number of ‘economically inactive’ citizens, suggesting people are being lured back into the jobs market.

Dr Heather Rolfe of the NIESR thinktank explains:

These figures indicate that, in the face of recruitment difficulties, including as a result of a large fall in net migration of EU citizens, employers are hiring people who have not been actively seeking work.

This might be seen as a positive sign, but this pool is likely to be limited”

NIESR@NIESRorg

“Interesting picture of an increase in both #employment and #unemployment in the three months to January 2018′ – Our @Heather_Rolfe reaction on the latest @ONS UK Labour Market #stats is out now – Read it here in full: https://www.niesr.ac.uk/media/niesr-press-note-%E2%80%93-niesr-reacts-latest-ons-uk-labour-market-statistics-13293 …

4:33 PM – Mar 21, 2018

• See NIESR’s other Tweets

Twitter Ads info and privacy

Ian Stewart, chief economist at Deloitte, has spotted another interesting angle in today’s jobs report: More people are quitting their jobs to move to another company.

That could drive wages growth higher, he reckons, as employers are forced to fight for labour.

“The post-Brexit squeeze on consumer spending power is easing. Low unemployment, a slowing flow of overseas workers into the UK and high levels of job vacancies are raising wage pressures and boosting job moves.

“The number of people resigning from one job to move to another fell in the wake of the financial crisis, but is now running at its highest level since 2001.

“The scene is set for a pickup in earnings growth this year.”

Factory workers and builders are enjoying decent pay rises, says Geraint Johnes, research director at the Work Foundation and Professor of Economics at Lancaster University Management School.

He’s hopeful that the fall in real wages will soon end, especially as the UK economy is still creating jobs..

“Encouraging news on pay includes the 2.8% rise in total pay on the preferred measure, this being driven by gains in manufacturing and, particularly, construction.

Alongside the drop in consumer price inflation announced yesterday, this heralds an early end to the squeeze on real earnings. Meanwhile, the 182k rise in full-time employees in employment figure signals a labour market that continues to grow.”

Despite the pick-up in wages in recent months, UK workers are still poorer than before the financial crisis once you adjust for inflation.

The Office for National Statistics explains that in real terms:

• average regular pay (excluding bonuses) for employees in Great Britain was £459 per week before tax and other deductions from pay, £14 lower than the pre-downturn peak of £473 per week recorded for March 2008
• average total pay (including bonuses) for employees in Great Britain was £488 per week before tax and other deductions from pay, £34 lower than the pre-downturn peak of £522 per week recorded for February 2008

The ONS also provided this chart, which shows the impact of austerity on the wages of teachers, doctors, police officers and other public sector workers