UK unemployment report puts pay growth in focus – business live

Rolling coverage of the latest UK labour market statistics, and other events across the markets

The pound is creeping up this morning, on hopes that today’s jobs report will show that pay growth (including bonuses) has jumped to 2.5% in the last quarter.

Sterling has gained 0.2% against the US dollar to $1.334, and is a little higher against the euro too at €1.136.

Although Britain’s unemployment rate remains encouraging, sentiment could easily take a hit if wage growth fails to meet market estimations.

A situation where pay growth fails to pick up is likely to continue squeezing consumers, especially in view of inflation jumping to its highest level in almost six years at 3.1%.

Economist Rupert Seggins has created some useful charts to explain today’s labour market report (which is released in 45 minutes):

1. UK unemployment rate figures today – consensus is for a fall to 4.2%, which would be the lowest rate since the 3 months to May 1975.

2. Yesterday’s inflation figures mean the pay squeeze is set to continue. Real regular pay set to fall c. 0.7%y/y (-0.6%y/y if you prefer CPIH).

The big news last month was the 14,000 person fall in employment. Consensus is for a fall of 48,000 in October.

4. A sizeable 117,000-person rise in inactivity last month. More students and more people long-term sick. Meanwhile no’s of retired & people looking after family fell.

In the City, shares in Dixons Carphone have jumped by 7.5% in early trading after it reported its best ever Black Friday trading.

That makes amends for a 60% tumble in pre-tax profits over the six months to 28 October, when Dixons Carphone suffered from a slowdown in mobile phone sales.

Half year results out today good like for like trading profits impacted by non trading one off items flagged in August. We make most of our profit in the second half and are forecasting to be in line with market. All in all thank you for your heroic work this year!

Mike van Dulken of Accendo Markets is hoping for a cheering unemployment report today:

UK Unemployment (9:30am) is expected to drop to a fresh 42-year low of 4.2%, while Average Earnings (incl. bonus) accelerate to a 2017 high of 2.5% (still shy of inflation, which hit a new multi-year high of 3.1% yesterday) and the ex-bonus print holds firm at 2.2%.

Here are the City consensus forecasts for today’s UK jobs report:

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

Related: Inflation rises to 3.1%, adding to UK cost of living squeeze

The important element here will be hourly wages, which could give an indication as the extent to which UK household purses are being squeezed. Average hourly wages are expected to be 2.5% in the three months to October, which is a respectable 0.3% increase from the three months to September.

This would represent a rare closing in the gap since Brexit, between the cost of living and wage growth.

Yellen’s press conference should prove to be a non-event given her recent testimony in Congress and that she will soon be stepping down once Powell is confirmed. The bigger question therefore is whether the Fed will significantly alter its economic and rates projections.

Our US colleagues’ view is that they would prefer to wait until March to make significant upgrades when they are likely to be in a better position to model the impact of the looming tax plan.

Continue reading…

EU Could Scrap “Divisive & Ineffective” Refugee Quota Scheme

The Guardian reports that EU could scrap a divisive scheme that compels member states to accept quotas of refugees, one of the bloc’s most senior leaders will say this week.

The president of the European council, Donald Tusk, will tell EU leaders at a summit on Thursday that mandatory quotas have been divisive and ineffective, in a clear sign that he is ready to abandon the policy that has created bitter splits across the continent.

Jennifer Rankin reports that Tusk will set a six-month deadline for EU leaders to reach unanimous agreement on reforms to the European asylum system, but will propose alternatives if there is no consensus. 

“If there is no solution… including on the issue of mandatory quotas, the president of the European council will present a way forward,” states a draft letter from Tusk to national capitals, seen by the Guardian.

In effect this means scrapping mandatory quotas, because Hungary, Poland and Czech Republic are fiercely opposed to the idea of dispersing refugees around the bloc based on a formula drawn up in Brussels. Tusk is likely to face opposition, however, from other EU bodies, including the European commission.

EU leaders introduced compulsory quotas in 2015 at the height of the migration crisis, as thousands of people arrived daily on Europe’s shores, many of whom were refugees from Syria, Iraq and Eritrea.

Hungary, Slovakia, Romania and the Czech Republic voted against the move, but the policy was forced through by a majority vote.

Hungary and Poland have defied the rest of the EU by not taking a single refugee under the scheme, which aimed to relocate about 120,000 refugees, mainly Syrians. The Czech republic has taken in only 12.

All three countries were referred to the European court of justice last week for failing to implement the policy, the usual procedure for flouting EU rules.

Despite the backlash against the emergency scheme, the European commission proposed making quotas a permanent feature of EU law in 2016. Under its proposal, countries that refuse to take part in a “corrective allocation mechanism” to take the pressure off member states bearing the brunt would have to pay a “solidarity contribution” of €250,000 (£220,000) per asylum seeker.

The idea has been stalled for months, as home affairs ministers who make the law have been unable to agree on it.

Tusk will call on EU governments to take charge, rather than leaving Brussels to set the pace in managing refugee policy.

“Only member states are able to tackle the migration crisis effectively,” Tusk’s letter says. “The EU’s role is to offer its full support in all possible ways to help member states handle the migration crisis. But the EU has neither the capacity nor legal possibilities to replace member states.”

Any move to drop the plan is likely to upset Italy and Greece, countries that have urged the rest of the EU to help them cope with large numbers of refugees and migrants in recent years. Germany and Sweden, backed by the European commission, are also likely to contest any plan deemed to reduce the help offered by other member states.

One EU diplomat said some member states were surprised by Tusk’s letter “because it doesn’t seem to be in sync” with work undertaken by home affairs ministers working on the file.

We suspect we know one other 'European' that will not be pleased… George Soros.