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UK jobs market losing steam as economic uncertainty rises – business live | Business

UK jobs market losing steam as economic uncertainty rises – business live | Business

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Key events:

Ashley Alder appointed to run City watchdog

Mark Sweney

Mark Sweney

The Financial Conduct Authority head offices in London.
The Financial Conduct Authority head offices in London. Photograph: Toby Melville/Reuters

The Financial Conduct Authority (FCA) has appointed Ashley Alder, the head of Hong Kong’s securities watchdog, as its new chairman.

Alder, who has run the Securities and Futures Commission (SFC) since 2011, joins as the UK’s financial watchdog remains mired in internal strife amidst strikes by staff over pay and conditions.

Alder, who two years ago was in the running to become chief executive of the FCA, will join as chairman in January for a five year term.

He replaces interim chair Richard Lloyd, who ran consumer watchdog Which? for five years until 2016, who was appointed after Charles Randell stepped down as FCA chair in May – a year before the official end of his five year term.

The appointment of Alder, who also chairs the Board of the International Organisation of Securities Commissions (IOSCO), follows a turbulent few years for the FCA.

The City watchdog, which is responsible for supervising thousands of companies, was criticised for its handling of two major consumer scandals in 2019: The £236m collapse of London Capital & Finance, which sold unregulated minibonds on investors, and failure of Neil Woodford’s equity fund.

The FCA has also found itself battling with staff since the appointment of Nikhil Rathi as chief executive in 2020, replacing Andrew Bailey who became governor of the Bank of England. This led to a walkout this summer, in a row over pay.

The jobs market isn’t the only part of the economy slowing. Consumers are cutting spending in the shops as high inflation and the cost of living squeeze hits their budgets.

The BDO High Street Sales Tracker shows that retail sales have grown at their lowest rate since February 2021, with like-for-like sales in June increased by 8.4% compared with a year ago.

An 8.8% drop in homeware sales suggests that consumers are postponing large purchases.

Lifestyle sales through online channels fell for the eighth consecutive month, as consumers cut their discretionary spending in the sector (which has seen its lockdown boost fade).

Sophie Michael, head of retail and wholesale at BDO, says retailers face a concerning outlook:

With consumer confidence at historically low levels, real wages falling to a 20-year low and interest rates set to rise further, there are few signs of encouragement for retailers.

All four English regions monitored by KPMG and REC saw a slowdown in permanent job placements, with the North of England only seeing a fractional upturn.

London saw the sharpest increase in temporary jobs in June, while the softest expansion was registered in the Midlands.

UK wage growth
Starting salary inflation eased to the softest since
August 2021, while temp wage growth edged down to a 12-month low.
Photograph: Graeme Wearden/KPMG/REC

Starting salaries continued to climb last month, KPMG and the REC’s UK jobs report shows.

The shortages of skilled candidates forced firms to lift their starting pay — good news for workers looking for help in the cost of living squeeze.

Pay pressures did moderate slightly, though, with starting salary inflation edging down to a ten-month low. That could ease the Bank of England’s worries of a wage-price spiral breaking out.

The report says:

The ongoing imbalance between the supply and demand for workers drove further steep increases in rates of starting pay during June.

Though sharp and well above the series average, the rate of starting salary inflation eased to the softest since August 2021, while temp wage growth edged down to a 12-month low.

Introduction: UK jobs market loses steam

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

The UK’s employment market is losing steam, in a sign of the challenge that will face the next government to strengthen the struggling economy.

British employers slowed their hiring through recruitment agencies again in June, with vacancies rising at the weakest rate in over a year.

The slowdown is due to rising economic uncertainty, spiralling costs, and a shortages of candidates, according to UK Report on Jobs, from KPMG and the REC (Recruitment & Employment Confederation).

The survey shows that permanent staff appointments and temporary positions both expanded at the softest rates for 16 months in June, as the labour market lost some strength.

UK jobs report
UK jobs report Photograph: KPMG and REC

Recruiters also reported another steep fall in overall candidate availability.

That’s partly due to a drop in foreign candidates…. and a reluctance to switch jobs in the current climate, as the so-called Great Resignation fizzles.

Recruitment consultancies often attributed lower candidate numbers to a generally low unemployment rate, fewer foreign workers, robust demand for staff and hesitancy to switch roles in the increasingly uncertain economic climate.

The report follows a slowdown in May….

….and shows we are past the peak of the “post-pandemic hiring spree”, as Neil Carberry, chief executive of the REC, explains:

That pace of growth was always going to be temporary – the big question now is the effect that inflation has on pay and consumer demand over the course of the rest of the year. Whether we will see the market settle at close to normal levels, or see a slowdown, is unpredictable at this point.

“Part of the reason for unpredictability in the market is a slower economy accompanied by severe labour and skills shortages. These are already proving a constraint on growth in many firms. The government should be thinking about how to ensure all its departments enable greater labour market participation and encourage business investment funds to help address this.

Also coming up today

After recovering on Thursday, the pound is hovering around $1.20 as the City waits to see who will emerge to succeed Boris Johnson as Prime Minister (a process which could take a few months).

There could be paralysis in the aftermath of yesterday’s dramatic resignation announcement, with Johnson promising no major policies, tax decisions or other changes of direction during his caretakership.

Daniele Antonucci, chief economist & macro strategist at Quintet Private Bank, says:

A Conservative leadership election is likely to begin within days. While his resignation could add to near-term uncertainty, so far the market response has been fairly muted.

Looking further out (past the current loss of growth momentum), the UK economy and its financial markets could perhaps benefit from more certainty.

Eleswhere, Britain’s competition watchdog, the Competition and Markets Authority, should be releasing its report into the fuel retail market today, following a request by Business Secretary Kwasi Kwarteng.

The latest US jobs report, June’s non-farm payroll, is expected to show that job creation slowed last month.

Economists predict the NFP will rise by 268k, down on the 390k US jobs created in May. A weak reading could lead to more worries about a possible US recession.

Strong odds for an economic data surprise tomorrow from non-farm payrolls. Consensus expects 0.17% monthly growth in payrolls, while the yearly and quarterly trends are running above this estimate. Our positioning runs the risk of a surprise here, so important to watch: pic.twitter.com/v8KLQ0IJUq

— Prometheus Research (@prometheusmacro) July 7, 2022

GOLDMAN SACHS: “We estimate nonfarm payrolls rose 250k in June, somewhat below consensus of +268k … We estimate an unchanged unemployment rate at 3.6%—in line with consensus—reflecting a solid rise in household employment offset by a 0.1pp rise in labor force participation”

— James Pethokoukis (@JimPethokoukis) July 8, 2022

European stock markets rallied yesterday, but are on track for a subdued open today.

The agenda

  • Morning: CMA expected to release report on UK motor fuel market
  • 9am BST: Italian industrial production for June
  • 12.55pm: ECB president Christine Lagarde takes part in a session at the Les Rencontres Economiques event in Aix-en-Provence, Franc
  • 1.30pm BST: US non-farm payroll jobs report for June

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