UK households ‘at breaking point’ as real wages continue to fall – as it happened

Britain’s unemployment rate has hit a new 42-year low, but economists are worried that wages are still failing to keep up with inflation

Time for a recap

Britain’s cost of living squeeze has intensified, after wages again failed to keep pace with inflation. Average earnings only rose by 2.1% in May to July, meaning real wages actually shrank by 0.4%.

“The strength of the economy is helping people of all ages find work, from someone starting their first job after leaving education, to those who might be starting a new career later in life.

“Britain’s employment success is largely about a growth in full-time and permanent work, as employers invest in Britain and offer quality job opportunities that put more money into people’s pockets.

With consumer’s real incomes falling, they are becoming more cautious and spending less. This is reflected in the increasing number of retailers with profit warnings or expressing cautious outlooks.

After a series of record highs, shares have dipped on Wall Street at the start of trading.

Apple’s shares have fallen 1%, following the unveiling of its latest products – including the iPhone X – last night.

S&P 500 opens lower as stocks slip from record highs

Here’s our news story on today’s unemployment and wage figures:

Related: UK wage rises lag behind inflation despite lowest jobless rate since 1975

Anger in the streets if Athens boiled over this morning with police firing tear gas at protesting workers from the Canadian-owned Eldorado Gold mine company.

Greek gold miners clash with police in Athens as doubt hangs over major investment. Video by @SdrjanTV

Bitcoin is having a bad day, following Jamie Dimon’s attack on the crypocurrency as a “fraud” that will blow up.

One Bitcoin now costs $3,830, down 8% today, and a fifth less than two weeks ago.

Meanwhile, tulip prices…

#BITCOIN 3816.25 -8.83%#ETHER 261.82 -11.12%#BITCOINCASH 478.35 -10.99%#cryptocurrency#BTC #ETH #BCH

OH: ‘so despite Dimon’s objections to Bitcoin, he is essentially admitting it has its uses’

The Social Market Foundation thinktank has calculated that the average worker is £309 per year worse off than a year ago, due to the drop in real wages.

SMF chief economist Scott Corfe points out that private and public sector workers are suffering alike.

“After adjusting for inflation, workers are significantly worse off than they were a year ago. In part this reflects the increase in the cost of living as a weak currency has pushed up the price of imported goods.

“But it also reflects weak earnings growth which remains stubbornly stuck in the doldrums. Improving productivity to boost pay is absolutely critical.”

Curiously, agriculture workers got a pay rise, even after inflation, in the last quarter.

That could be a sign that farmers are having to pay more to attract and regain staff, now that Brexit and the fall in the pound has put off workers from the EU.

The minister for employment, Damian Hinds, says we should celebrate Britain’s success in creating jobs – while conceding that things could be better.

“The strength of the economy is helping people of all ages find work, from someone starting their first job after leaving education, to those who might be starting a new career later in life.

“Britain’s employment success is largely about a growth in full-time and permanent work, as employers invest in Britain and offer quality job opportunities that put more money into people’s pockets.

Guardian Business has launched a daily email.

Besides the key news headlines that you’d expect, there’s an at-a-glance agenda of the day’s main events, insightful opinion pieces and a quality feature to sink your teeth into each day.

Related: Business Today: sign up for a morning shot of financial news

Elsewhere, former chancellor Lord Alastair Darling has been reliving the Run on Northern Rock 10 years ago this week.

I don’t think Brexit would have happened if it hadn’t been for the political and economic events of the preceding 10 years. people were disillusioned. they felt badly treated, they felt squeezed.

“It’s very difficult to criminalise bad judgements”.

Related: In pictures: Northern Rock

Dr John Philpott, director of The Jobs Economist, says you can see a “Brexit effect” in the UK’s labour market:

The more competitive exchange rate has given a boost to manufacturing jobs, up 34,000 in the second quarter, but there are signs of weakness in the real estate sector where the number of jobs fell by 34,000. The consequences of the real wage squeeze for consumer spending may also be putting pressure on the arts, entertainment and recreation sector, which shed 30,000 jobs in the quarter.

This kind of mirror image effect could be an early pointer to a post Brexit future of winners and losers in the UK job market.’

Britain’s public sector has shrunk to its smallest level since at least the start of the millennium.

Today’s report says:

For June 2017, 16.9% of all people in work were employed in the public sector (the lowest proportion since comparable records began in 1999) and the remaining 83.1% worked in the private sector.

UK public sector now smallest as share of workforce (16.9%) since 1999, average public sector employee £1,000/yr worse off v 2010 peak.

This latest fall in real wages means that British workers still haven’t recovered the earnings lost after the financial crisis.

The Resolution Foundation has calculated that average earnings are £16 per week below their peak in 2007. That means workers are around £830 per year worse off.

Continuing pay falls come with avg weekly earnings now £16 below peak. OBR forecasts suggest point of recovery now well into next decade

Average real public sector pay (excluding banks) is now about £20 a week below peak, or £1000 per year

Ben Brettell, senior economist at Hargreaves Lansdown, is also worried about Britain’s weak productivity:

The Bank of England predicts wage growth will rise to 3% next year, while inflation falls back towards the 2% target. The first part of that equation looks optimistic to me.

The only sustainable driver of real wage growth is increasing productivity – and in this respect the UK continues to lag behind its developed-world counterparts, notably the US and Germany. Unless a solution to this productivity puzzle is found, a meaningful improvement in living standards could be some way off.

Professor Geraint Johnes, Director of Research at the Work Foundation at Lancaster University, can see the rise of the ‘gig’ economy in today’s jobs report.

He says:

There have been particularly large gains in accommodation and food services (consistent with the boost to domestic tourism provided by the weak pound) and also in information and communication services.

Employment in real estate activities and in professional, scientific and technical services has declined over the quarter.

Indeed the rapid rise in employment suggests that productivity growth remains hard to come by, and this will continue to put limits on pay growth.

The number of employees increased by 292,000 to 27.10 million over the last 12 months, according to today’s report.

But the number of self-employed people also rose, by 88,000 to 4.85 million.

Jeremy Cook, chief economist at currency firm WorldFirst, says we shouldn’t celebrate the fall in the UK unemployment rate to a 42-year low.

“There are more people in work than there have been for over 40 years, yet those people are only getting poorer due to wages that can’t keep up with inflation. Pay increases are simply not coming for a multitude of reasons.

Low productivity, Brexit fears over the future of individual sectors’ trade relationships and margins cut by higher import costs have all been referenced by companies large and small so far in 2017.

Britain’s weak wage growth is leaving consumers struggling to cope, warns Ed Monk, associate director for personal investing at Fidelity International.

Monk calls today’s report a “bitter pill to swallow”, adding:

Yesterday’s UK CPI figures showed that inflation had jumped to 2.9% which means that wages are falling further behind the price we pay for goods and services.

As a result UK households will continue to have their finances stretched to breaking point.

“Lagging wages makes it more likely the Bank of England will look through rising inflation when it decides on interest rates this week.

Prices are rising above target, which creates the case for raising rates, but today’s wage data suggests all is still not right in the economy.

Ouch! The pound has fallen back from this morning’s one-year high, following the disappointing wage growth figures.

Sterling is back below $1.33; traders are concluding that the cost of living squeeze will deter the Bank of England from raising interest rates.

The UK wage growth data was as bad as it can get.

At 4.3%, Britain’s jobless rate hasn’t been this low since March to May 1975, when Harold Wilson was prime minister:

Breaking! Britain’s unemployment rate has fallen to a new 42-year low of 4.3%, in the three months to July.

That’s down from 4.4% a month ago, and the lowest since 1975.

The boss of JP Morgan has weighed in on the cryptocurrency debate, declaring that Bitcoin is “a fraud” that will end in tears.

The currency isn’t going to work. You can’t have a business where people can invent a currency out of thin air and think that people who are buying it are really smart.

“If you were in Venezuela or Ecuador or North Korea or a bunch of parts like that, or if you were a drug dealer, a murderer, stuff like that, you are better off doing it in bitcoin than US dollars.

Related: Bitcoin is a fraud that will blow up, says JP Morgan boss

A decade after the run on Northern Rock, Britain’s banking sector is unprepared to handle another crisis.

That’s according to a new report by the Adam Smith Institute, the right-wing thinktank, which argues that the Bank of England is failing to police the banks properly.

Related: UK’s high street banks are accident waiting to happen, says report

Economist Rupert Seggins is tweeting some good charts to get us up to speed, ahead of today’s UK jobs report.

They shows how real wages (adjusted for inflation) have been falling for several months, even as the unemployment rate hits its lowest since the 1970s.

1. UK labour market stats today. The headline was given to us yesterday. Pay squeeze. Using the CPI, real pay is expected to fall -1%y/y.

2. The UK employment juggernaut is expected to rumble on. Consensus forecast says 154,000 more in employment in the 3 months to July.

3. How low can the UK unemployment rate go? Nobody really knows. Big headache for the #MPC. Peacetime lows have been in the 1% to 2% range.

4.The (rough) historical relationship between wage growth & unemployment may still be there. Sort of. Light at the end of the pay squeeze?

The strength of the pound is pulling shares down in London this morning.

The FTSE 100 has shed 58 points, or 0.8%, to 7354. Mining giants, oil companies and major exporters, such as pharmaceutical group Shire and drinks firm Diageo, are among the fallers.

The miners have all moved lower, while BP and Shell are both down half a percent. However, the main reason for the UK index’s decline was the pound’s latest climb.

The British pound has seen “tremendous strength this week”, says Naeem Aslam of Think Markets, adding:

If you want to see a currency which is having one of the best runs this week, then look no further.

Sterling has also risen against the euro, gaining 0.2% to €1.1124.

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

The pound has hit a new one-year high this morning, as the City braces for a new health-check on Britain’s jobs market.

Related: Pound hits one-year high as UK inflation rate jumps to 2.9% – as it happened

For average earnings the story continues to be disappointing.

A solid wages number could shift the calculus on the MPC further towards a rate rise with chief economist Andrew Haldane likely to join the other two hawks Michael Saunders and Ian McCafferty in pushing for a rate rise, given recent comments he made during the summer, when inflation ticked up to the same level it is now.

European opening call @LCGTrading $FTSE -18 points at 7382$DAX -26 points at 12498$CAC -9 points at 5200#EuroStoxx -7 points at 3505

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The Kansas “Experiment”

@TBPInvictus here: Having failed on, well, just about everything he’s attempted so far, President Trump and Congress will now apparently turn their attention toward “tax reform,” i.e. tax cuts for the wealthy – the Republican panacea for all that ails us. Of course, we’ve already been treated to the worthless, utterly discredited supply-side, trickle down…

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The post The Kansas “Experiment” appeared first on The Big Picture.

10 Wednesday AM Reads

My baguette and cafe au lait mid-week morning train reads: • Why American Workers Pay Twice as Much in Taxes as Wealthy Investors (Bloomberg) • It Distracted Us. It Gave Us Uber. It Made Selfies a Thing. (New York Times) • 5 facts about Millennial households (Pew Research) • The Man Running University of California’s Lean, Mean Endowment Machine (Bloomberg Businessweek) • New analysis…

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The post 10 Wednesday AM Reads appeared first on The Big Picture.

Median wealth of black Americans ‘will fall to zero by 2053’, warns new report

Study predicts huge and growing gulf between white US households and everyone else could be disastrous for future of America’s middle class

Growing up in the projects of Baltimore in the 1980s, things like savings accounts, stocks and bonds were completely foreign to Mysia Hamilton. Asked if her parents could have passed along some money to help her buy a car, go to school or put into a house, she can’t help but chuckle.

“No, that wasn’t there. There was no wealth. My mother was working, she was providing – we weren’t on the street begging – but there was no money in terms of ‘here you go’. No money to pass down.”

Three years from now, white US households are projected to own 86 times more wealth than black households

African-American households are making ​​‘middle-income money’ – but have the wealth of a white high-school dropout

Related: TV made America’s bail system famous. Now reformers want to end it

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