Today is one of those days where we find ourselves awash in economic data from the UK. The labour market data usually comes out the day before the inflation numbers but it is a week late and has been produced at the same time as the public finances numbers. So whilst this is not what is called a theme day we have a lot to digest as we mull why the public finances were not released yesterday or tomorrow so they could get their own space and attention.
Let us start with some good news from an area that has been short of it in the credit crunch era.
Looking at annual growth rates for total pay (including bonuses), between September to November 2017 and September to November 2018:
total pay in nominal terms increased by 3.4%, the annual growth rate has not been higher since May to July 2008.
total pay in real terms increased by 1.2%, the annual growth rate has not been higher since September to November 2016.
I am pleased to see a concentration on total pay as whilst we learn something from regular pay the main number of interest is the total. It has risen to the highest it has been for over a decade and according to the official measure at least we have some sort of solid real wage growth. The actual picture in terms of real wages is not as good as that sadly because it relies on the CPIH measure that found itself under fire from the House Of Lords only last week.
We are not convinced by the use of rental equivalence in CPIH to impute owner-occupier housing costs
But even if we switch to other inflation measures which are invariably higher we see that we have at least some real wage growth albeit not much if compared to RPI, but at least we have some. If we switch to the monthly numbers we see that they are erratic but the last 3 readers at 2.9% then 4% then 3.2% do show a drift higher and thus we may see another better three-monthly figure next time around. The catch will be when the October 4% drops out because we might then see something of a sharp fall.
Moving to actual amounts we see this.
For November 2018, average total pay (including bonuses), before tax and other deductions from pay, for employees in Great Britain was:
£527 per week in nominal terms, up from £510 per week for a year earlier.£495 per week in constant 2015 prices, up from £490 per week for a year earlier, but £30 lower than the pre-downturn peak of £525 per week for February 2008.
Put like that there is something of a quirk in the numbers as it was £528 in October so wages are up on a year before but down on a monthly basis so I think we need to welcome the news but cross our fingers looking ahead. The areas which have been pulling the numbers higher have been construction ( 4% in November) which in general has been doing well over the past year and finance ( 4.2% in November) which has picked up in the last couple of months.
This continued the good news theme.
The employment rates for both men and women have been generally increasing since early 2012. For the latest time period, September to November 2018, the employment rate for all people aged from 16 to 64 years was 75.8%, the highest since comparable estimates began in 1971.
This area was the first to turn around back in the day and regular readers may recall it was a leading indicator when other signals both lacked and lagged. It took the economic output numbers ( GDP) another year or so to catch up.
Whilst the rate of growth has slowed it remains positive.
For September to November 2018, there were an estimated 32.53 million people aged 16 years and over in work, 141,000 more than for June to August 2018 and 328,000 more than for a year earlier.
Although some have been forced into this situation as for example by this.
The increase in the employment rate for women over the last few years has been partly due to ongoing changes to the State Pension age for women, resulting in fewer women retiring between the ages of 60 and 65 years.
Here the news was more nuanced as we see that relatively things improved.
the unemployment rate for all people was 4.0%, it has not lower been since December 1974 to February 1975
But in absolute terms the number rose in the quarterly period measured.
1.37 million unemployed people, little changed (up 8,000) compared with June to August 2018 but 68,000 fewer than for a year earlier.
Let us look at this from the labour market data which would suggest rising income tax revenues and higher VAT receipts from the combination of higher wages and more people being employed.
Central government receipts in December 2018 increased by 4.3% compared with December 2017, to £59.8 billion……
Much of this annual growth in central government receipts in December 2018 came from Value Added Tax (VAT), Income Tax, Rail Franchise Premia and National Insurance contributions compared with December 2017.
So that does seem to have some backing and if we switch to the fiscal year so far we see that income tax receipts have risen by £8 billion to £128.2 billion compared to last year. These extra receipts combined with some more VAT and for once some extra from Corporation Tax ( up £2.3 billion to £45.8 billion) have played their part in this.
Borrowing in the current financial year-to-date (YTD) was £35.9 billion, £13.1 billion less than in the same period in 2017; the lowest year-to-date for 16 years (since 2002).
There was an issue with the December numbers and it was pretty much from something not far off most people’s lips these days.
Borrowing (public sector net borrowing excluding public sector banks) in December 2018 was £3.0 billion, £0.3 billion more than in December 2017;
Here it is.
In December 2018, the UK’s net contribution to the European Union (EU) was £1.5 billion higher than in December 2017……In December 2018, there have been some amendments to member states’ contributions to 2018 EU budget, however the amount returned to the UK is much smaller than in December 2017.
As to the national debt it continues to rise but it has been outperformed by the economy so in relative terms it has fallen.
Debt (public sector net debt excluding public sector banks) at the end of December 2018 was £1,808.9 billion (or 84.0% of gross domestic product (GDP)); an increase of £48.6 billion (or a decrease of 0.5 percentage points of GDP) on December 2017.
We see that the main trends looked at today provide some welcome mid-winter cheer for the UK. The key signal these days is real wages and the difference to 2016 is that this time around we have some wage growth rather than the leader being lower inflation. This will boost other areas of the economy and it has done its bit for the public finances.
However there are dark clouds out there and it is hard not to think of what is happening in China and in the car sector as we note that manufacturing wage growth has been declining over the past 12 months.. The 3.1% of November 2017 was replaced by a mere 1.2% this November reminding us that some areas are singing along with Taylor Swift.
Now I’m lying on the cold hard ground
Oh, oh, trouble, trouble, trouble
Oh, oh, trouble, trouble, trouble