This week has already seen a fair flurry of new information on the UK economy, so let us start with what will have caught the eye of Mark Carney and the Bank of England.
LONDON (Reuters) – Asking prices for British houses put on sale in the five weeks to Jan. 11 rose by a record amount for the time of year, property website Rightmove said on Monday, adding to signs of a post-election bounce in consumer and business confidence…….Rightmove said average asking prices of property marketed between Dec. 8 and Jan. 11 jumped 2.3% in monthly terms, the biggest increase for that period since the survey started in 2002.
The cautionary note is that it is asking prices ( you can ask what you want…) and not sold or traded prices but those looking for a post election bounce will add it to the Halifax numbers.
Yesterday also brought positive news on UK household finances as well.
“Latest survey data certainly show some post-election
bounce for UK households, with the headline index up
to a one-year high and house price expectations at their
strongest since October 2018. That said, cooling inflation
was most likely the real driving force, propping up real
earnings and disposable incomes” ( Markit )
So there are various surveys suggesting optimism for house prices and one saying something similar for household finances. This is really rather awkward for a Bank of England not only warming up for a Bank Rate cut with Gertjan Vlieghe explicitly saying he will look at sentiment measures. Of course Friday’s Retail Sales showed weakness but they can be unreliable and erratic.
This morning has brought both good and not so good news on the employment situation. So let us start with the positive.
Facebook says it is to create 1,000 new jobs in the UK this year, delivering a vote of confidence in the UK economy ahead of Brexit.
The tech firm issued a long-term commitment to the country as it made the announcement, in the run-up to a speech to be made in London later on Tuesday by its chief operating officer Sheryl Sandberg.
Facebook said the new roles would take its UK workforce beyond 4,000 people. ( Sky News)
Meanwhile the Financial Times is doing some scaremongering about HS2.
Hundreds of employees could face job cuts, while companies working on HS2 have been told to slow down work as uncertainty mounts over the fate of Britain’s most ambitious infrastructure project
I do not wish for people to lose their jobs but in this instance we have the issue of what are they actually producing?
UK Labour Market Release
We saw another in a long-running series where there was strong employment growth.
There was a 208,000 increase in employment on the quarter. This was, again, mainly driven by quarterly increases for full-time workers (up 197,000; the largest increase since September to November 2015) and for women (up 148,000; the largest increase since February to April 2014). The quarterly increase in women working full-time (up 126,000) was the largest since November 2012 to January 2013.
The tilt towards female employment was also to be found in the annual comparison where of an increase of 349,000 full-time jobs some 317,000 were for women.
This meant that there was another record.
The UK employment rate was estimated at a record high of 76.3%, 0.6 percentage points higher than a year earlier and 0.5 percentage points up on the previous quarter.
I will look at the broader consequences of this later but for the moment let us stay in the labour market and note the influence of what with apologies to those in it is something of a residual category.
The UK economic inactivity rate was estimated at a record low of 20.6%, 0.4 percentage points lower than the previous year and the previous quarter.
Okay so what is going on here?
Estimates for September to November 2019 show 8.51 million people aged between 16 and 64 years not in the labour force (economically inactive). This was 145,000 fewer than a year earlier and 587,000 fewer than five years earlier. The annual decrease was driven by women, with the level down 157,000 to reach a record low of 5.18 million.
So it is another case of let’s hear it for the girls where women have stopped being recorded as inactive and are now employed instead. There is a combination of good news and the influence of the raising of the state pension age at play here. As an aside the broad sweep has been women moving from inactivity to employment since these records began in 1971. The timing of the recent move also suggests that there was an influence from students as well.
There were fears of a rise in unemployment but as you can see below they were unfounded.
For September to November 2019, an estimated 1.31 million people were unemployed. This is 64,000 fewer than a year earlier and 618,000 fewer than five years earlier……The UK unemployment rate was estimated at 3.8%, 0.2 percentage points lower than a year earlier but largely unchanged on the previous quarter.
The previous release had seen a fall but this was not repeated.
Estimated annual growth in average weekly earnings for employees in Great Britain remained unchanged at 3.2% for total pay (including bonuses), and slowed to 3.4% from 3.5% for regular pay (excluding bonuses).
There was a switch towards bonus payments although slightly confusingly less than last year!
The annual growth in total pay was weakened by unusually high bonus payments paid in October 2018 compared with more typical average bonus payments paid in October 2019.
Let me now switch to the official view on real pay.
In real terms, annual pay growth has been positive since December 2017 to February 2018, and is now 1.6% for total pay (compared with 1.5% last month) and 1.8% for regular pay (unchanged from last month).
Sadly this relies on the woeful CPIH inflation measure and if we now switch from good news ( real wage growth) to the overall picture we get some bad news.
The equivalent figures for total pay in real terms are £503 per week in November 2019 and £525 in February 2008, a 4.1% difference.
Regular readers will be aware of my views on the inflation measure so let me present the issue another way today. The offiicial release points us towards the numbers for real regular pay. Can you guess which of the lines below that one is and no cheating?!
The chart was provided by Rupert Seggins and as you can see rather changes both the narrative and the perspective.
We find that if we look back the sequence of strong UK employment data started in 2012 and it is ongoing. There is a particular context to this though and let me illustrate with a tweet from Chris Dillow of the Investors Chronicle.
ONS also says hours worked rose 0.5% in Sep-Nov. With GDP rising only 0.1%, this means productivity fell. Might be partly a Brexit effect (uncertainty cut output but encouraged labour hoarding). But it reinforces the picture of long-term stagnation.
The issue here is that with the numbers we have productivity fell. But it is also true that last time the UK labour market and GDP diverged like we are seeing now it was the ( more positive) labour market which was correct as GDP later rose. It is another problem for the economics 101 view that the labour market responds in a lagged fashion as back then it led and GDP followed. More specifically we often see these days that employment is a driver of the economy rather than a follower.
Moving to wages we see that finally the employment growth gave us real wage growth but it took so long we have a bit of a mountain to climb. That is really quite a devastating critique of the Ivory Tower “output gap” thinking that has as many holes in it as I am hoping Arsenal’s defence will have tonight. Yet only last week Bank of England policymakers were repeating their output gap mantra. On that subject they have something of a problem again because they have got us ready for an interest-rate cut just in time for most of the data to be good. The bad bit was the retail sales numbers from Friday which now look out of phase with the employment numbers making me wonder if their seasonality algorithm has had a HAL-9000 moment? Whilst there is an intra-market shift in their favour as well maybe Aldi thinks do if this is any guide.
Aldi plans to increase pay for its staff by just over 3%, making it one of the best-paying supermarkets in the UK.
The discounter said its minimum hourly pay rates will rise from £9.10 an hour to £9.40, with workers inside the M25 getting £10.90 an hour instead of £10.55…….Aldi, Britain’s fifth-largest supermarket, also said it would be hiring 3,800 new employees for store level positions.