Unemployment jumps as cracks grow in labour market – latest updates

Workers 
Workers picking grapes at a Nyetimber vineyard earlier this month Credit: Simon Dawson/Bloomberg

Unemployment in the UK jumped to 4.5pc in the three months to the end of August as the labour market came under increasing pressure.

The rise – up from the 4.1pc rate to the end of July – was sharper than economists had expected, and came amid a drop in employment and continued rise in benefit claims.

The latest data release from the Office for National Statistics broadly covers August and September, and is one of the last labour data releases to encompass the period in which the Goernment was offering maximum job support.

Upcoming releases are expected to show a faster deterioration in conditions as fresh lockdowns accompany less-generous relief efforts.

Good night

That's all for today - thanks for reading and do join us again tomorrow morning. 

Wall Street ends winning streak

Over in New York, it's a similar story as both the Dow and S&P fall to end a four-day winning streak. The pause in Johnson & Johnson's Covid vaccine trial appears to have elevated concerns about a full economic rebound from the coronavirus-led downturn.

J&J fell 2.3pc after saying it would take "a few days" to review its halted clinical trial following an unexplained illness in a study participant, possibly delaying one of the most closely watched efforts to contain the pandemic.

Some of the companies most affected by the pandemic - cruise line operators Carnival, Norwegian Cruise Line Holdings and hotel operator Wynn Resorts - were among the biggest fallers on the S&P 500.

FTSE ends lower

The FTSE 100 has ended the day about 0.5pc lower at 5,969 points, with Rolls-Royce again taking the wooden spoon, although a tenth of the index shed more than 3pc.

Experian was the biggest riser, up 1.7pc.

Bailey: 'Objective is to meet inflation target while considering growth and employment'

When asked whether Bank's mandate should include maximum employment, Bailey says:  "Our objective is to meet the inflation target in a way that [considers] growth and employment.

Ruling in Airbus-Boeing row threatens new tariffs on US imports 

Imports from the US imports into Europe face being hit with $4bn of tariffs after the World Trade Organisation ruled on the ongoing dispute over illegal subsidies Airbus claims Boeing received.

My colleague Alan Tovey reports:

The international trade arbiter said illegal state support in the form of subsidies and tax breaks received by Boeing caused Airbus damages of $4bn a year in lost sales and market share. Under the WTO’s ruling, the European Commission can now impose levies on US goods equal to the value of the damage it rules has been suffered by Airbus.

Goods that could be hit with the tariffs include aircraft made by Boeing, as well as a diverse range of other products. The ruling is seen as the final stage in a 16-year battle between Airbus and Boeing being fought by proxy through their governments, with each claiming the other received illegal support to help produce aircraft.

Read more here

Juventus shares tank after Ronaldo tests positive for Covid 

Moving away from the Lords for a moment, shares in football club Juventus have fallen sharpy after its star player Cristiano Ronaldo tested positive for Covid-19 this afternoon.

Bailey: No 'immediate risk' of a credit crunch

Bailey says he does not see any risk of a credit crunch in the near term.

He adds: "We've had a severe health crisis. We haven't had a banking and finance crisis to go with it. So we've got a banking and finance system that is supporting the economy rather than the other way round."

'Not appropriate' to attach climate-related conditions to CCFF, says Bailey 

Asked whether the Bank should have attached climate-related conditions to its Covid Corporate Financing Facility, Bailey says the scheme needed to get "short term and immediate liquidity" to businesses to keep them afloat, so it was "not appropriate" to attach anything other than credit-related conditions to it. 

He adds that the Bank is not looking at an extension of the scheme.

Bailey: The hard yards are still ahead of us

Bailey has told the committee that "the hard yards are still ahead of us".

He said a V-shaped recovery is "not the way I look" at the UK economy "at the moment", adding that UK output was 9-10pc below fourth quarter 2019 level at end of the third quarter this year.

Andrew Bailey in front of the Lords Economic Affairs Committee

The Bank of England governor is in front of the House of Lords Economic Affairs Committee now.

You can follow the action via this link.

Ikea to buy back furniture for up to half its original value

Good new for Ikea customers fed up with their flat pack desks, drawers and book shelves. The Swedish retailer will now buy them back from you for resale as secondhand – and you could get up to half of what you paid back. 

We report:

The furniture giant will launch its Buy Back initiative in the UK and Ireland on November 27 as part of its sustainability drive.The group aimed to become a "climate-positive business" by 2030, meaning it wanted materials and products to be reused or recycled.The initiative will see customers exchange their furniture for vouchers, the value of which depends on the condition of the goods they are returning.Customers with "as new" items, with no damage, will get half of the original price; "very good" items, with minor scratches, will get 40pc; and "well used", with several scratches, will get 30pc, Ikea said. The one caveat is that products being returned must be "fully assembled". 

Wall Street opens lower

US stocks have started the day in the red as investors weigh a potential setback on progress towards a Covid-19 vaccine ahead of a busy period for corporate earnings. 

Credit: Bloomberg 

Handover

Time for me to hand over to my colleague Simon Foy, who will steer the blog through the US open and into the afternoon. Thanks for following along today!

IMF: Covid will deal $28 trillion hit to global economy

Covid will blow a $28 trillion (£21.1 trillion) hole in the world economy by 2025, leaving the entire globe significantly poorer than it would have been without the pandemic, the International Monetary Fund has warned.

My colleague Tim Wallace reports:

The shortfall compared to pre-coronavirus forecasts amounts to a loss of around $3,500 per person over five years.

Economists have upgraded their forecasts a little for this year as countries recovered more rapidly than expected from lockdowns, but there are still serious risks of another slowdown as the virus has not yet run its course.

“This crisis will likely leave scars well into the medium term as labour markets take time to heal, investment is held back by uncertainty and balance sheet problems, and lost schooling impairs human capital,” said Gita Gopinath, chief economist at the IMF.

“The cumulative loss in output relative to the pre-pandemic projected path is projected to grow from $11 trillion over 2020-21 to $28 trillion over 2020-25. This represents a severe setback to the improvement in average living standards across all country groups.”

Ireland sets out record budget to tackle virus aftershocks

Pascal Donohoe, Ireland’s finance minister Credit: DAMIEN EAGERS/AFP via Getty Images

The Irish government has set out plans for a record spending splurge to counter the pandemic and looming threat of an unruly Brexit endgame.

Bloomberg has more details:

Speaking to lawmakers in Dublin on Tuesday, Finance Minister Paschal Donohoe said the entire 2021 budget package is worth close to €18bn, with most being earmarked for a fund to deal with the virus and Brexit, more health spending and other measures.

“This package is unprecedented in both size and scale in the history of the Irish State,” Donohoe said. “We have faced numerous difficulties since independence, but never one like Covid-19.”

Mr Donohoe warned that an estimated 320,000 jobs will be lost this year, but added that 155,000 new roles should be created in 2021.

Cineworld could be out of cash in weeks, analysts say

Cineworld is just weeks from running out of cash and will need to raise $500m (£380m) from lenders to get through to next spring, analysts have warned. 

My colleague Oliver Gill reports:

The world’s second-biggest cinema group has opened talks with banks and other creditors after last week's shock decision to close all of its UK and US sites, putting 45,000 jobs at risk.

The chain has hired PJT Partners to assist in negotiations. Lenders appointed Houlihan Lokey and FTI Consulting ahead of what were expected to be tough negotiations of the heavily indebted company.

Bank of America, an adviser to Cineworld on its aborted £1.6bn acquisition of Canadian rival Cineplex earlier this year, said the roughly $400m the company had in the bank in June would not be enough to get it to Christmas.

PureGym considers legal action over Liverpool closures

People in a PureGym in Leeds post-lockdown Credit: Danny Lawson/PA Wire

PureGym, the UK’s biggest gym chain, has said it is mulling legal action against the Government over ‘Tier 3’ restrictions that have forced Liverpool workout spaces to close.

PA reports:

Humphrey Cobbold, chief executive officer of the company, said the move, which will see it close seven sites in the Liverpool City Region, will actively contribute to the “wilful destruction” of the sector.

He urged the Government to present data to support the closure of gyms and fitness sites, claiming that there is “no evidence of Covid-19 transmission in gyms”.

The Government and local leaders have said that gyms will have to close in the city, alongside leisure centres, betting shops, casinos, pubs and bars.

UK says time ‘extraordinarily short’ for deal with EU

The war of words between the UK anf EU drags on, with the Government now briefing that the EU must “urgently up the pace and inject some creativity” into trade talks.

The unnamed official said:

The EU have been using the old playbook in which they thought running down the clock would work against the UK… This is all the more frustrating because it is clear that we have come a long way since the beginning of the year.

The pound is near session lows.

What’s live?

In case you need more live news injections, here are our other live blogs:

Chinese car sales jump amid recovery

China’s car sales enjoyed a “golden September” as its economy appears set to become the only one to record growth in 2020.

My colleague n reports:

The world’s largest vehicle market and second-biggest economy saw automobile sales climb 12.8pc last month to 2.6m, according to data from the China Association of Automobile Manufacturers – marking the sixth straight month of growth.

The figures underline the differing economic fortunes between the country where the coronavirus outbreak began and the rest of the world. 

Customs data also released on Tuesday showed that Chinese goods exports rose 9.9pc in September compared with the same month last year – slightly higher than the 9.5pc increase in August. This brought annual export growth for the third quarter to 8.8pc, compared to just 0.1pc in the second quarter.

JP Morgan beats profit estimates as Wall Street earnings season kicks off

JP Morgan boss Jamie Dimon Credit: REUTERS/Jeenah Moon/File Photo

 JP Morgan has beaten estimates for profit and set out loan-loss provision far narrower than analysts had expected, marking a powerful start to Wall street’s earnings season.

It third-quarter earnings per share, a key metric for bank-watchers, came in at $2.92, compared to the $2.23 predicted by Refinitiv polling.

The group set aside just $611m for credit losses in the quarter – well below the $2.28bn predicted and effectively at pre-pandemic levels.

Chief executive Jamie Dimon said:

The corporate & investment bank continues to be a big driver of firm performance. We maintained our credit reserves at $34 billion given significant economic uncertainty and a broad range of potential outcomes.

Pound slips slightly against dollar

The pound has lost a little ground against the dollar today, amid a broad-based strengthening for the greenback as global sentiment cools. The slight slip comes amid weeks of strong gains for sterling.

Rubbish to riches: SSE shares rise after stake sales

SSE has agreed to sell its stake in three energy-from-waste facilities for almost £1bn under plans to raise at least £2bn by next autumn.

My colleague Simon Foy reports:

Shares in the FTSE 100 energy giant rose 4pc in early trading after it announced the disposal of its 50pc stake in the West Yorkshire multifuel facilities.

The transaction is expected to be completed by late 2020 subject to regulatory approval and is part of a wider strategy to secure at least £2bn from selling off unwanted assets by autumn 2021.

SSE said it will continue to focus on its wind farm operations.

Finance chief Gregor Alexander said: “This sale marks a major step in our plans to secure at least £2bn from disposals by autumn 2021, with just over £1.4bn now delivered.”

Market moves

After a moderate drop at the open, European markets have pulled up slightly, and are now cruising along slightly in the red. In other words, going nowhere.

Full report: Alcohol sales jump as curfew kicks in

My colleague Simon Foy has a booze-focused take on this morning’s Kantar supermarket data. He writes:

Alcohol sales at supermarkets soared in recent weeks after the Government imposed a 10pm curfew on pubs and bars across the country, according to new data from Kantar.

Shoppers rushed to their local stores after the curfew came into force and the Eat Out to Help Out scheme ended, spending £261m more on beer, wine and spirits in September compared to the same period last year. 

German forward-looking sentiment dips

Expectations sentiment among German investors has dipped sharply, as case numbers grow across the world.

The ZEW research institute’s gauge of future expectations fell from  77.4 to 56.1 this month, while the measure of current condition edged slightly higher, from -66.2 to -59.5.

ZEW president Achim Wambach said:

 The great euphoria of August and September seems to have passed. The recent sharp rise in the number of corona infections increases the uncertainty about further economic developments.

KPMG was auditor to suspicious vehicle linked to Wirecard – FT

Accountancy firm KPMG – which discovered rival Big Four rival EY missed an opportunity to detect fraud at collapsed German group Wirecard – was itself the auditor of a Mauritius-based vehicle that “may have been used to siphon off the payments group’s funds”, the FT reports.

The paper says:

In a special audit into Wirecard, which precipitated the collapse of the German group, KPMG wrote an unpublished addendum that criticised EY for failing to follow up properly on 2016 allegations of accounting fraud…

KPMG found that a subsequent EY investigation into the allegations was “incomplete” and there was evidence “that should have been investigated conclusively”. In the event, the Wirecard fraud continued for four years.

However, absent from the KPMG report was any acknowledgment that the auditor on the Mauritius fund, named Emerging Market Investment Fund 1A, was KPMG.

KPMG declined to comment to the FT.

Money round-up

Here are some of the day’s top stories from the Telegraph Money team:

French Connection warns of further closures

The retailer has closed several stores recently Credit:  Rii Schroer

French Connection has warned that it could close more of its stores after losses widened at the high street fashion chain.

My colleague Simon Foy reports:

The struggling retailer closed four bricks and mortar outlets and five concessions over the past six months, and said it expected more "non-contributing" stores to close in the second half of the year. 

It came as the company slumped to a £12.2m interim pre-tax loss as lockdown restrictions hammered sales. Revenue more than halved from £51m last year to £23.9m.

However, its online business performed solidly during the first wave of the pandemic, with sales up more than 8pc during the six months to the end of July. Ecommerce sales constituted 56pc of its total sales for the period, compared to 22pc in 2019.

Labour market data: reaction

As ever, a veritable landslide of reaction commentary has filled my inbox following this morning’s ONS labour market data release. Here are some of the salient responses:

The think-tanks

The Resolution Foundation notes that this is the largest fall in employment for over a decade, warning that men and young people in particular have borne the brunt of the job losses.

Nye Cominetti, its senior economist, said:

The jobs market deteriorated significantly over the summer, with the biggest rise in unemployment in over a decade taking place even while the economy continued to open up.Thousands of self-employed men lost their jobs, while women working part-time left the jobs market altogether.With economic support falling just as lockdown restrictions increase across the country, we should prepare for a major increase in unemployment over the coming months.

Stephen Evans, chief executive of the Learning & Work Institute, adds:

The partial reopening of the economy and the furlough scheme helped to support employment over the summer. But with around two million people still furloughed and economic restrictions tightening in many parts of the country, a long winter lies ahead. The Winter Economy Plan will help, but we need more ambitious support for jobs, incomes and retraining.

Tony Wilson from the Institute for Employment Studies tweets:

The consultancies

Samuel Tombs from Pantheon Macroeconomics says the damage caused by Covid-19 is becoming “much clear”, adding:

Looking ahead, it remains likely that job losses will accumulate in October, ahead of the wind-down of the Coronavirus Job Retention Scheme at the end of the month……we continue to expect the headline rate of unemployment to shoot up over the coming months, though our forecast for an 8pc rate by the end of this year now looks just out of reach, following the broadly unchanged level of payroll employee numbers in September.
Credit: Pantheon Macroeconomics

Paul Dales from Capital Economics says there is more bad news yet to come, writing:

We always thought that a more marked weakening in the labour market was on the cards and to some extent this just means that some of the bad news has already happened. But the combination of the end of the national furlough scheme later this month and the new COVID-19 restrictions that may extinguish the economic recovery for a few months means that the unemployment rate may yet rise to between 7pc and 8pc.

The business groups

Mike Cherry, chairman of the Federation of Small Businesses, says:

These figures are a stark reminder of the human impact of this terrible pandemic. Through adjustments to the Job Support Scheme, the Government is making welcome efforts to aid job retention. As harsher restrictions take effect across many parts of England, further measures may well be needed.   

Institute of Directors chief economist Tej Parikh adds:

The pick-up in vacancies offers a spot of relief. But while the UK's flexible labour market has helped ensure high employment over recent years, it will surely need more support now. The Government should boost retraining courses, encourage start-up activity, and help SMEs to retain staff with a reduction in Employers’ NICs.

The unions

Frances O’Grady from the TUC says the UK is “on the precipice of an unemployment crisis”, adding:

Wage replacement should be 80pc for businesses who have to shut. We need a more generous short-time working scheme for firms which aren’t required to close but will be hit by stricter local restrictions. And self-employed people in local lockdown areas need help too. 

Grocery sales rises as shoppers gear up for lockdowns

Take-home grocery sales growth jumped to 10.6pc in the four weeks to October 4th, according to the latest market share data from Kantar.

Over twelve weeks, sales climbed by 9.4pc, with the pace picking up over the latest month.

Despite the climb, the research group said there had been “limited evidence of consumers stockpiling”, with total trip counts “well below” levels seen before the initial national lockdown in March.

Kantar’s Fraser McKevitt said:

Shoppers are moving a greater proportion of their eating and drinking back into the home.  This is likely a response to rising Covid-19 infection rates, greater restrictions on opening hours in the hospitality sector, and the end of the Government’s Eat Out to Help Out scheme.

Its shop-by-shop breakdown shows Ocado continued to be the biggest grower as online sales flourished. The period also encapsulates Ocado’s switch to working with Marks & Spencer – a shift it claims drew high numbers of initial sales. Mr McKevitt notes:

Since it started to sell M&S products on 1 September, two-thirds of Ocado shoppers have ordered Percy Pigs at some point, including an introductory period when the famous sweets were included free.
Credit: Kantar

Market make weak open

European markets have opened slightly lower, with the FTSE 100 once again  reversing signs of early gains. Weighing on sentiment is news that Johnson & Johnson has been forced to temporarily halt its vaccine study after a clinical trial patient grew unexpectedly ill.

Credit: Bloomberg TV

Full report: Unemployment at a three-year high

My colleague Russell Lynch has a full report on this morning’s labour market figures. He writes:

An estimated 1.52m people were unemployed over the quarter, 138,000 above the March to May period. Male workers are bearing the brunt with unemployment at 4.9pc, compared to 4pc for women.

The true impact of the virus on unemployment has so far been shielded from the official figures by the Government's furlough scheme, which finishes in less than three weeks' time. Furloughed workers – an estimated 9pc of the workforce – are not counted as unemployed.

Vacancies climb

The number of job vacancies climbed again during September, taking the three-month rate slightly higher. Overall, however, the number of openings is 40.5pc lower than a year ago.

It’s another record jump that feels slightly hollow given the amount of ground still to be made up. The ONS says:

For July to September 2020, there were an estimated 488,000 vacancies, which is a record quarterly increase of 144,000 vacancies from the record low in April to June 2020. The increase is driven by small businesses (49 or fewer employees).

Claimant count pushes up

The number of Britons claiming unemployment benefits – whether through Job Seeker’s Allowance or certain types of Universal Credit – continued its upwards trajectory in data to September 10th. 

In total, around 2.7m people were claimants at the start of last month, a 120.3pc rise since March.

The ONS notes:

Enhancements to Universal Credit as part of the UK government's response to the coronavirus (COVID-19) mean that an increasing number of people became eligible for unemployment-related benefit support despite still being in work.

Consequently, changes in the Claimant Count will not be wholly because of changes in the number of people who are not in work.

Employment drop defies expectation

Overall, employment dropped by 153k over June, July and August –  about five time as sharp as economists polled by Bloomberg had expected. That left 32.59m people in employment at the end of the period.

 The ONS says:

  • the estimated employment rate for all people was 75.6pc; this is 0.3 percentage points down on the year and 0.3 percentage points down on the quarter
  • the estimated employment rate for men was 79.1pc; this is 1.1 percentage points down on the year and 0.6 percentage points down on the quarter
  • the estimated employment rate for women was 72.1pc; this is 0.4 percentage points up on the year and 0.1 percentage points down on the quarter

Redundancies soar

UK redundancies jumped to their highest level since the financial crisis between June and August,  with 227,000 people losing their jobs over the period, a 114,000 increase on the previously quarter.

Hours worked continue to recover

The three-month period from June to August saw the biggest recover in hours worked since the start of the pandemic, capturing the period when a large number of retail and hospitality staff went back to work.

As the ONS notes, that’s a record jump:

Between March to May 2020 and June to August 2020, total actual weekly hours worked in the UK saw a record increase of 20.0m, or 2.3pc, to 891.0m hours. Average actual weekly hours worked saw a record increase of 0.7 hours on the quarter to 27.3 hours. 

Making sense of today’s data

It can be hard to keep track of the different date periods covered in each labour market release. Handily, the ONS provides this breakdown of which periods each set of data covers: 

Credit: ONS

Unemployment rate hits 4.5pc

The UK’s three-month unemployment rate rose to 4.5pc in August, the highest reading since 2017.  

The ONS notes:

  • this is 0.6 percentage points higher than a year earlier and 0.4 percentage points higher than the previous quarter
  • the estimated UK unemployment rate for men was 4.9pc; this is 0.8 percentage points higher than a year earlier and 0.7 percentage points higher than the previous quarter
  • the estimated UK unemployment rate for women was 4.0pc; this is 0.3 percentage points higher than a year earlier and 0.1 percentage points higher than the previous quarter

ONS commentary

Payroll count rises

The data’s in – and it’s something of a mixed bag. First up, the HMRC payroll count (the freshest data of the set) shows payrolls actually rose during September, taking the net fall since March down to 629,000. It’s the first rise since January.

What to expect today

As ever, the labour market figures will be a bit of a smorgasbord, covering several different periods. HMRC’s experimental payroll data has been seen as the best ‘live’ indicator of job losses, although it has been subject to big revisions in the past.

On the headline unemployment figure, economists polled by Bloomberg expect a rise to 4.3pc for August, from July’s 4.1pc.

As a reminder, the Office for National Statistics says it has made changes to how it weights the surveys upon which its labour stats are based. As statistician Jonathan Athow wrote in a blog published yesterday:

Reviewing all the data has suggested that no longer being able to knock on people’s doors has affected the types of households responding. In particular, we are seeing a higher proportion of owner occupiers and fewer people renting among our respondents than before the pandemic…

For tomorrow’s release we will therefore reweight the estimates so that the shares of owner occupiers and renters are the same as before the pandemic hit in March. This should give us a much more representative set of labour market statistics.

Agenda: Labour market data looms

Good morning. All eyes are on the UK’s latest labour market figures, coming out at 7am. As ever, the data will show a variety of measures, spread in this instance across August and into September.

They are expected to show a continued rise in unemployment as cracks begin to appear, but continue to show a period in which the labour market was shielded to an extent by the furlough scheme.

5 things to start your day

1) £40bn a year tax rises needed to stop debt spiralling, IFS warnsThe think-tank said the deficit this year was set to reach levels not seen outside the two world wars due to Covid-19.

2) Christmas comes early for retailersThe big day may still be more than 10 weeks away but Britons have already started their Christmas shopping with gusto, according to the British Retail Consortium (BRC).

3) Negative interest rates could put an end to free banking, experts warnNegative interest rates could spell the end of free bank accounts, experts warned after the Bank of England gave its clearest indication yet that the controversial policy could be introduced.

4) Barclays and Staveley enter bitter war of words as legal showdown enters final weekLawyers acting for Barclays and financier Amanda Staveley entered into a bitter war of words on Monday as a court case which has gripped the City entered its final week. 

5) Boohoo cuts ties with another Leicester supplierBoohoo has cut ties with a clothing supplier in Leicester after it emerged that a director was involved in money laundering.

Coming up today

Interim results 
French Connection

Trading statement
Sabre Insurance

Economics
Unemployment, earnings, BRC retail sales monitor (UK), trade balance (China), ZEW surveys (Germany), inflation (Germany and US)