UK jobs market cooling as unemployment rises and real wages keep falling – business live | Business

Sarah Butler

Tomato ketchup fans will agree with Jeremy Hunt that inflation has an ‘insidious’ impact.

The cost of Heinz tomato ketchup in UK supermarkets has shot up 53% since 2020, making it the biggest riser in of a list of leading branded groceries.

Two other Heinz products also made the top 10 in the index of average price rises compiled by the consumer group Which? – the brand’s cream of chicken and tomato soups.

The research comes four months after the company’s products temporarily disappeared from the shelves of Tesco, the UK’s biggest supermarket chain, in a row over price increases. Heinz was thought to have been seeking cost price rises of as much as 30% in the summer.

Which? found that its list of 79 popular branded products exceeded the overall rate of grocery price inflation, with none rising less than 22%. More here:

Soaring inflation has also hammered Japan’s economy.

Japanese GDP shrank unexpectedly, by 0.3%, in the third quarter of the year, new figures show.

The global slowdown hit businesses, while the weak yen drove up the cost of imports.

It means that Japan and Britain were the only two G7 countries not to grow in July-September, with UK GDP falling 0.2%.

Today’s UK jobs report shows ‘tentative signs’ of an economic slowdown, explains Victoria Scholar, head of investment at Interactive Investor.

Despite fears of a looming recession, the labour market has remained very tight post pandemic driven by the Great Resignation after Covid as well as Brexit which have reduced the available pool of potential employees in the UK, creating a worker shortage and thereby pushing up job vacancies and flattering the unemployment rate.

This has also given workers much more bargaining power when it comes to wage negotiations, allowing employees to demand higher wages to cover the increasing cost of living, especially in the private sector.

However, we are beginning to see tentative signs of an economic slowdown come through in the labour market figures now with job vacancies retreating from the highs as businesses make cutbacks and reduce hiring and with the unemployment rate surpassing analysts’ expectations. And although wages are rising sharply, they are still falling short of inflation, representing a real pay cut both in the private and public sector.

No doubt Jeremy Hunt will claim both the low unemployment rate and high wage growth as victories for the government when he delivers his Autumn Statement on Thursday.

But underneath the surface, the picture is less rosy with inflation still eroding real pay and with a major worker shortage that is adding to the inflationary backdrop and making the labour market appear stronger than it really is.

More than 2.5 million people are now unable to work due to long-term illness, the most on record.

As this chart shows, long term sickness has driven the rise in economic inactivity (those neither working nor looking for work).

Tony Wilson, director at the Institute for Employment Studies, says far too many people are falling out of the jobs market altogether, and need more government support.

“There are now 630 thousand more people out of work than before the pandemic began and today’s figures show clearly that people aren’t becoming unemployed, they’re leaving the labour force altogether. The number of people leaving work to unemployment over the last three months was below a quarter of a million for the first time on record, while more than twice as many people left work to economic inactivity.

And our analysis shows that once people become economically inactive they are less and less likely to come back to work, with the number off work for five years or more growing by more than two hundred thousand in the last few years.

Our Commission on the Future of Employment Support launched last week showed that a large part of the problem is that people just aren’t getting the right help to get back into work. The number of jobseekers using Jobcentre Plus has halved over the last decade while the government’s Restart scheme is set to underspend by over a billion pounds.

With more than a million unfilled vacancies, a shrinking economy and falling living standards, cutting access to employment support is a complete false economy. The Budget on Thursday needs to put this right, in particular by opening up Restart to more of those who are out of work and want help to get back in.”

Chancellor Jeremy Hunt has blamed the Ukraine war for driving up inflation, meaning wages aren’t keeping up with prices.

He also points out that unemployment is still near its record low, despite rising in the last quarter.

“Unemployment remains near record lows – providing security to families and testament to the resilience of the British economy even in the face of severe global challenges.

“But I appreciate that people’s hard-earned money isn’t going as far as it should. Putin’s illegal war has driven up inflation – a hidden and insidious tax that is eating into paychecks and savings.

“Tackling inflation is my absolute priority and that guides the difficult decisions on tax and spending we will make on Thursday. Restoring stability and getting debt falling is our only option to reduce inflation and limit interest rate rises.”

More than half a million working days were lost to strike action in August and September – the most in over a decade.

Much of the disruption was centred on the transport sector, where there were widespread railway strikes, and in communications, where BT staff held their first national walkouts in 35 years.

Darren Morgan, director of labour and economic statistics at the Office for National Statistics (ONS) explains:

“August and September saw well over half a million working days lost to strikes, the highest two-month total in more than a decade, with the vast majority coming from the transport and communications sectors.

“With real earnings continuing to fall, it’s not surprising that employers we survey are telling us most disputes are about pay.”

Public sector workers are being worst hit by the real pay squeeze.

Regular pay in the public sector rose by 2.2% in the last year, lagging far behind the private sector where pay has risen by 6.6%.

That is the largest difference between the private sector and public sector on record (apart from in the pandemic, when private sector earnings sank).

UK companies cut back on hiring, again, in the last quarter.

The number of job vacancies dropped to 1.225m in August to October 2022, down 46,000 in May to July 2022.

It’s the fourth quarterly fall in a row.

Vacancies fell fastest at information and communication companies (-11.9%), and at pubs, restaurants, cafes and hotels (-11.3).

More companies have reported holding back on recruitment due to economic pressures, the ONS says.

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

Britain’s jobless rate has risen, as the economy heads into what could be a long recession.

The unemployment rate nudged up to 3.6% in the July-September quarter, up from 3.5% a month ago, according to the latest labour market report from the Office for National Statistics.

Yael Selfin, chief economist at KPMG UK, warns that cracks now starting to show in the wider economy, meaning unemployment will keep rising.

“It is only a matter of time before the recessionary environment spills into the labour market as employers increasingly consider the weakening demand and rising labour costs.

While the vacancy rate will likely be one of the first indicators to turn, we expect the unemployment rate to eventually peak at around 6% by 2024.

Wages have risen faster than expected – but still not fast enough to keep up with inflation.

Total pay, including bonuses, rose by 6% per year in July-September, while regular pay rose by 5.7%, up from 5.4%.

That’s the strongest growth in regular pay seen outside the pandemic period.

But with consumer price inflation hitting 10.1% in September, real wages are still falling.

But… the number of people on company payrolls has continued to rise in October – to 834,000 above the pre-pandemic levels.

Almost 9 million people were not working or looking for work, higher than before the pandemic. Around 21.6% were classed as economically inactive – up from 20.2% in February 2020.

The ONS says:

During the latest three-month period, the increase in economic inactivity was driven by those who are long-term sick, who increased to a record high.

The rise in people with long Covid is one factor, as is home working in the pandemic.

There has been a sharp rise in the number of people being unfit for work because of neck and back injuries – after many months of home-working at crowded kitchen tables and cramped home offices.

Also coming up today

We get a second estimate of eurozone growth in the last quarter, plus a healthcheck on German economic sentiment.

Investors will pay close attention to the latest producer price inflation data from America. It will show how fast goods and services prices rose in October.

Michael Hewson of CMC Markets explains:

In recent months PPI has tended to act as a leading indicator, although there was a spike in June, the general trend has been a gradual decline in prices since the end of Q1.

Final demand PPI is expected to slip back to 8.3% from 8.5%, while core PPI excluding food and energy is expected to remain steady at 7.2%.

The agenda

• 7am GMT: UK labour market report

• 9am GMT: IEA monthly oil market report

• 10am GMT: Eurozone Q3 GDP (second estimate)

• 10am GMT: Eurozone trade balance

• 10am GMT: ZEW index of German economic sentiment

• 1.30pm GMT: US producer price inflation for October