BETA filters Key Facts (2) United Kingdom (5) Bank of England (4) Samuel Tombs, chief UK economist at Pantheon Macroeconomics, also highlighted the increase in immigration, as well as further increases in the UK unemployment rate: The unemployment rate is no longer falling and the most recent indicators show that it will start to rise much sooner than the Bank of England predicts. Labor demand stabilizes as labor supply increases. The recovery in the workforce has been driven by an increase in immigration, now that Covid no longer affects immigration decisions and more UK businesses now have sponsor permits, meaning they can legally employ third-country nationals. Indeed, the number of non-UK nationals either working or looking for work in the UK rose by 248,000, or 6.3%, year-on-year in the second quarter. This year’s combination of rising UK wages and stable UK visa minimum wages suggests that immigration will continue to increase. Meanwhile, we believe that domestic labor supply will continue to increase, as has occurred in previous real wage compressions, as households try to maintain their living standards. Accordingly, we believe that the unemployment rate will start to rise soon, reaching around 4.2% by the end of this year. Updated at 08.43 BST Turning to the UK labor market data, James Smith, developed markets economist at ING said: There are three key takeaways from the latest UK jobs figures. First, hiring demand is clearly falling, and this is more evident than the decline in job vacancies – a trend that is likely to continue, according to more up-to-date online vacancy numbers. That doesn’t mean companies are letting staff go — layoff levels haven’t budged from their lows in recent weeks and unemployment doesn’t appear to be rising, even if the labor market has stopped tightening. The second thing that stands out is that the number of people who are inactive – neither employed nor actively looking for work – rose sharply again last month. The vast majority of the increase in inactivity we’ve seen since the start of the pandemic (and indeed in recent months) is linked to long-term illness. There are now more than 300,000 more people who fall into this category compared to pre-pandemic and the challenges in the NHS suggest that this story is unfortunately not going to improve very quickly. The bottom line is that the number of foreign nationals working in the UK labor market has risen markedly this year, having fallen earlier in the pandemic, although this is almost entirely due to non-EU workers. The number of EU nationals working in the UK Kingdom decreased by more than 6% compared to the 2019 average. All this paints a complicated picture for the Bank of England. Hiring demand is weakening, but at the same time skills shortages and labor supply issues that have plagued the labor market for several months show only limited signs of improvement. Inactivity remains high, even as immigration – a key source of worker shortages through the pandemic – is showing some signs of recovery. Updated at 08.44 BST
UK grocery price inflation hits 11.6%, highest since 2008
Separate figures from data firm Kantar show UK food price inflation hit its highest level since 2008, reaching 11.6% over the past four weeks. Butter, milk, chicken and dog food have seen the biggest price increases. The average household’s annual grocery bill is now expected to jump by £533 to £5,128, the equivalent of £10.25 every week. Faced with rising inflation, people are increasingly turning to own-label value products, which tend to be cheaper, with sales up 19.7% this month. The data also showed supermarket sales rose 2.2% in the 12 weeks to August 7, the fastest growth the sector has seen since April 2021. The long hot spell led to a 23% jump in sales mineral water and 18% increase in ice cream sales. People have also shopped for summer holidays, with sales of clothing such as shorts, rompers, caps and swimwear increasing by 163%. Fraser McKevitt, head of retail and consumer information at Kantar, said: As predicted, we have now reached a new peak in grocery price inflation, with items like butter, milk and poultry in particular seeing some of the biggest jumps. This rise means the average annual shop is expected to increase by £533 or £10.25 every week if consumers buy the same products as last year. It’s no surprise that we’re seeing shoppers make lifestyle changes to cope with the additional demands on their household budgets. Private label ranges are at record levels of popularity, with sales increasing by 7.3% and holding 51.6% of the market compared to branded products, the largest share we have ever recorded. German discount chain Lidl remains the fastest-growing grocer, with sales up 17.9% over the past 12 weeks, increasing its market share to 7%. Buoyed by the popularity of its dairy and bakery lines, this is its highest rate of growth since September 2017. Aldi also performed strongly and its market share increased by 0.9 percentage points to 9.1%. Together Lidl and Aldi took 1.8% of UK grocery sales during this period, representing a £2.3bn annual shift in spending towards discounters. McKevitt said supermarkets are running fewer promotions than in the past. People shop between retailers to find the best value products, but in 2008 there was a much greater reliance on deals. It’s harder to chase those deals in 2022 – the number of products sold on sale is at 24.7% for the four weeks to 7 August 2022, compared to 30% 14 years ago. Instead, supermarkets currently direct shoppers to their everyday low prices, price ranges and price matches. In the last month we have really seen retailers expand and advertise their own value ranges across the store to reflect demand. Consumers are welcoming the different choices and options available to them on the shelves, with sales of value own-label products growing by 19.7% this month. For example, Asda’s Just Essentials range, launched this summer, is already in 33% of its customers’ baskets. Updated at 08.41 BST Here’s our full story on labor market statistics: Meanwhile, around 16,000 British Airways workers are set to receive a pay rise of up to 13%, reversing cuts imposed during the Covid pandemic. Union leaders last night said the deal came after a strike threat earlier this summer by check-in staff led to a pay deal extended across the workforce. It is understood the deal will apply to around 16,000 non-management workers across the company, including cabin crew, engineers and baggage handlers, helping to restore pay to 2019 levels after the airline cut staff wages when the pandemic set flights around the world. The ONS said the number of people in full-time employment has increased. The number of part-time workers has been rising since the start of 2021, recovering from large falls in the early stages of the Covid pandemic, but fell between April and June. The number of self-employed people fell in the first year of the pandemic and remained low, although the number increased during the last quarter. Some economists say the chances of another half-point interest rate hike by the Bank of England in September have increased after the jump in nominal wage growth, which has washed out the effect of inflation. Thomas Pugh, economist at audit, tax and advisory firm RSM UK, said: The jump in headline wage growth to 4.7% in June, which is miles above the 3%-3.5% that is in line with the 2% inflation target, significantly increases the chances the Monetary Policy Committee (MPC ) to proceed to second base 50%. rate hike in September. Admittedly, overall wage growth eased from 6.4% year-on-year in the quarter to May to 5.1% year-on-year in June as growth in bonus payments eased to 10.4%. However, bonus payments have been volatile of late and the MPC prefers to look at underlying wage growth, which has risen sharply. Indeed, pay growth rose rapidly in every industry except the public sector. Add in employment growth of 160,000 and it paints a picture of a very tight labor market. Combine that with rising inflation, which is likely to have reached close to 10% in July, and we think a 50 basis point increase next month is now more likely than not. There is evidence that the labor market is starting to cool, he noted. The number of job vacancies fell by 19,800 in July, the first quarterly decline since June to August 2020. Indeed, much softer economic growth in the second half of the year due to the cost of living crisis will reduce demand for labor and reduce some of the tightness in the labor market. However, we believe the smaller pool of available workers will keep the labor market tight for at least the next two years. The tightness in the labor market was reflected in the strong increase in nominal wages. However, real overall wage growth, which takes inflation into account, fell by 2.5%, suggesting the cost of living crisis took a bigger toll in June. Real wages are likely to fall by around 3% in 2022, which would be the deepest squeeze on spending power on record. Ben Harrison, director of the Labor Foundation at Lancaster University, a think tank on improving work in the UK, said: Ahead of next week’s energy price cap announcement, there is more bad news for workers as real wages fell by a record 3% year-on-year. With inflation at 9.4% and the Bank of England predicting it will peak at 13% in early 2024, people across the UK are facing tougher decisions as their regular pay doesn’t keep pace with rising prices. The six million workers in seriously insecure jobs will be hit hardest and are already running out of options. Many have…
