Unemployment and wage growth both rise faster than expected
UK unemployment rose to 4.2% in June, ahead of expectations, while soaring wages mean more interest rate pain could be on the way.
Analysts had expected the rate of unemployment to remain at 4%, but the rise suggests that the latest cycle of rate hikes is starting to put Britons out of work.
However, wages are continuing to rise at a pace that the Governor of the Bank of England Andrew Bailey has warned is too fast to keep inflaton under control. Latest figures show wages icluding bonuses were up by 8.2%. Excluding bonuses, wages are up by 7.8%. UK unemployment rose to 4.2%Both figures comfortably beat expectations.
That may mean more interest rate rises are on the way.
ONS director of economic statistics Darren Morgan said: “The number of unemployed people has risen again while the number of people working has fallen back a little. This is mainly due to people taking slightly longer to find work than those who started job hunting in recent months. The drop in those neither working nor looking for work is mainly among those looking after their family or home. Meanwhile the number of people prevented from working by long-term sickness has risen again to a new record.
“Job vacancies have now fallen over a quarter of a million since this time last year. However, they remain significantly above pre-COVID levels.
“Earnings continue to grow in cash terms, with basic pay growing at its fastest since current records began. Coupled with lower inflation, this means the position on people’s real pay is recovering and now looks a bit better than a few months back.”
China in surprise interest rate cut
The People’s Bank of China surprised markets this mornning with a cut to interest rates, in an effort to kick start an economy that’s been sputtering amid deflation and low domestic demand.
The central bank for the world’s second-largest economy was widely expected to hold rates, but instead lowered them by 0.15 percentage points.
It comes after days of disappointing economic and market news out of China. Yesterday, new fears hit the country’s property sector as shares in the country’s top developer Country Garden plummeted after trading of its bonds was suspended.
Robert Carnell, regional head of research for Asia-Pacific at ING, said: “From a macro perspective, today’s policy decisions are somewhat helpful. They will help improve the debt-service ability of cash-strapped local governments and property companies.
“But this isn’t a game-changing outcome, and so we doubt that market sentiment will dramatically improve just on this.
“More policy measures will be needed and more will certainly be delivered. The PBoC has not ended the rate-cutting cycle yet, and there will be further iterations of policy rate cuts along the lines of what we have seen today.”
The SSE Composite is down by 1% in Shanghai today, while the Hang Seng Index in Hong Kong is down by 1.25%.
Morning refresh: What you need to know to start the day
Good morning from the City desk of the Evening Standard.
Inflation is set to fall by more than a full percentage point when data is unveiled tomorrow. That’s the view of a number of economists, who say the rate of price rises will have fallen to 6.8% in June, taking inflation to its lowest level since February last year.
But will the news bring welcome relief for mortgage holders by fending off more interest rate rises? Probably not, analysts say, because core inflation, a measure which excludes fuel and food, is set to fall at a much slower pace, and that’s the figure most inside the Bank of England will pay closer attention to.
Here’s a summary of our top headlines from yesterday:
This morning we’re expecting UK unemployment data, as well as interim results from retirement financial services firm Just Group. In the afternoon, we’ll get data on US retail sales.