UK jobless rate falls to new 43-year-low, but pay growth weakens

Tuesday’s official figures also showed the sharpest annual decline in the number of EU workers in Britain since 1997. (Reuters)
Updated 14 August 2018
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UK jobless rate falls to new 43-year-low, but pay growth weakens

  • The figures painted a largely familiar picture of a tight labor market — including a record number of job vacancies — failing to translate into strong wage growth
  • Total annual wage growth slowed to a nine-month low of 2.4 percent, below forecasts for it to hold at 2.5 percent

LONDON: Britain’s unemployment rate fell to its lowest in over 43 years in the three months to June and fewer workers made do with insecure jobs, but there was little upside for most as pay growth slowed to its weakest in nine months.
Tuesday’s official figures also showed the sharpest annual decline in the number of EU workers in Britain since 1997, continuing a trend seen since the 2016’s vote to leave the EU, and a pick-up in annual productivity growth.
Despite some positive elements, the figures painted a largely familiar picture of a tight labor market — including a record number of job vacancies — failing to translate into strong wage growth.
Britain’s economy warmed up a little in the second quarter from its winter slowdown of early 2018, official data showed last week, but there was no sign of an end to its lackluster performance in the run-up to next March’s Brexit.
“This will not be what the Bank of England will have wanted to see, as one of the justifications for (its) decision to hike rates earlier this month was that it was expecting wage growth to start lifting off.
This hasn’t happened yet,” said Emma-Lou Montgomery, an associate director at Fidelity International.
The BoE raised interest rates on Aug. 2 for only the second time since the financial crisis.
Tuesday’s data showed productivity grew at its fastest annual rate since late 2016 and the number of people whose main job was an insecure zero-hours contract fell by the most since 2000, the Office for National Statistics said.
The unemployment rate fell to 4.0 percent in the April-June period, the Office for National Statistics said.
That was the lowest since the three months to February 1975 and beat economists’ forecasts in a Reuters poll for it to hold steady at a previous low of 4.2 percent.
The drop came despite a smaller-than-expected number of jobs created over the three-month period, 42,000 — less than half the average forecast by economists in a Reuters poll.
Sterling briefly rose above $1.28 against a broadly weaker dollar, as Tuesday’s data helped a struggling pound move away from 13-month lows plumbed last week.
Total annual wage growth slowed to a nine-month low of 2.4 percent, below forecasts for it to hold at 2.5 percent.
The ONS said changes to the timing of annual bonus payments was partly responsible.
Excluding bonuses, pay growth fell to 2.7 percent, well below the 4 percent rate typical before the financial crisis a decade ago.
Output per hour worked grew by 1.5 percent year-on-year in the April-June period, the biggest increase since late 2016 after a 0.9 percent rise in the first quarter of 2018.
With less than eight months until Britain is due to leave the European Union, the ONS data showed an acceleration of EU nationals leaving Britain’s workforce.
In the second quarter there were 2.35 million EU nationals working in Britain, down 86,000 on a year ago, the largest fall since records began.
“Shortages are already hampering firms’ ability to compete and create jobs, so it’s vital that the UK pursues an open and controlled post-Brexit immigration policy,” Matthew Percival, head of employment at the Confederation of British Industry, said.
The number of nationals from the eight East European countries that joined the EU in 2004 fell by 117,000, an 11.7 percent drop on the year. That was partly offset by a 54,000 increase in Romanians and Bulgarians.
The number of workers employed on often-precarious zero-hours contracts fell to 780,000, or 2.4 percent of the workforce, the lowest since 2015.


Oil rises on expected OPEC cuts, but surging US supply drags

Updated 16 November 2018
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Oil rises on expected OPEC cuts, but surging US supply drags

  • Prices were mainly supported by expectations OPEC would start withholding supply soon
  • US output has surged by almost a quarter since the start of the year

SINGAPORE: Oil prices rose on Friday amid expectations of supply cuts from OPEC, although record US production dragged.
US West Texas Intermediate (WTI) crude oil futures were at $56.84 per barrel at 0353 GMT, up 38 cents, or 0.7 percent, from their last settlement.
Brent crude oil futures were up 48 cents, or 0.7 percent, at $67.10 per barrel.
Prices were mainly supported by expectations the Organization of the Petroleum Exporting Countries (OPEC) would start withholding supply soon, fearing a renewed rout such as in 2014 when prices crashed under the weight of oversupply.
OPEC’s de-facto leader Saudi Arabia wants the cartel and its allies to cut output by about 1.4 million barrels per day (bpd), around 1.5 percent of global supply, sources told Reuters this week.
However, Morgan Stanley warned a cut by the Middle East dominated producer group may not have the desired effect.
“The main oil price benchmarks — Brent and WTI — are both light-sweet crudes and reflect this glut,” the US bank said.
“OPEC production cuts are usually implemented by removing medium and heavier barrels from the market but that does not address the oversupply of light-sweet.”
Due to the structural oversupply that has emerged in the market from record production by many countries, Morgan Stanley said that “OPEC cuts are inherently temporary (because) all they can do is shift production from one period to another.”
While OPEC considers withholding supply, US crude oil production reached another record last week, at 11.7 million bpd, according to US Energy Information Administration (EIA) data published on Thursday.
US output has surged by almost a quarter since the start of the year.
The record output meant US crude oil stocks posted the biggest weekly build in nearly two years.
Crude inventories soared 10.3 million barrels in the week to Nov. 9 to 442.1 million barrels, the highest level since early December 2017.
This surge contributed to oil prices falling by around a quarter since early October, taking many by surprise.
“Oil bulls, us included, have capitulated and we no longer see oil climbing to $95 per barrel next year,” Bank of America Merrill Lynch said in a note.
While sentiment has turned bearish, some analysts warn that 2019 could be tighter than expected.
“We expect 2019 oil demand to reach 101.1 million bpd,” natural resources research and investment firm Goehring & Rozencwajg said, up from just under 100 million bpd this year.
At the same time, the firm said production outside North America was set to disappoint.
Add OPEC’s expected supply cuts, and Goehring & Rozencwajg said “those investors who are able to adopt a contrarian stance ... and stomach the volatility ... are being presented with an excellent investment opportunity” to buy into oil after the recent slump.
Bank of America agreed, saying “we believe oil is oversold and will likely bounce up from the current levels, as OPEC+ dials back production in December.”