It is the UK that is in the economic spotlight this morning as we look to dig some insight out of the labour market figures. Many of the usual metrics are failing us as we have looked at originally with reference to Italy, but some are working. The best guide we get to the fall in employment comes from this.
Between January to March 2020 and April to June 2020, total actual weekly hours worked in the UK decreased by a record 191.3 million, or 18.4%, to 849.3 million hours.
This compares to 16.7% or 877.1 million hours last month. So as you might expect the rate of change has slowed quite a bit as lockdown began to be eased but we are still falling.In terms of context there is this.
This was the largest quarterly decrease since estimates began in 1971, with total hours dropping to its lowest level since September to November 1994. Average actual weekly hours fell by a record 5.6 hours on the quarter to a record low of 25.8 hours.
The weekly numbers have dipped further too as they were 26.6 hours last month.
If we look at the annual picture for more perspective we see that whilst the vast majority of the change is “right here, right now” as Fatboy Slim put it we can see that the economy was hardly flying before the Covid-19 pandemic. Although in something of an irony I suppose there were phases where productivity was better.
As to the sector worst hit there is no great surprise.
The accommodation and food service activities industrial sector saw the biggest annual fall in average actual weekly hours, down 15.4 hours to a record low of 13.0 hours per week.
The Office for National Statistics has been trying to do a weekly breakdown which tells us this.
During May we saw average actual hours start to increase slowly for the self-employed, however this increase has slowed down and hours remained relatively flat throughout June.
Here it is in graphical format.
So we learn a little but this only takes us to the end of June.
The opening salvo warns us that there is trouble ahead.
Employee pay growth declined further in June following falls in April and May; growth has been affected by lower pay for furloughed employees since March, and reduced bonuses; nominal regular pay growth for April to June 2020 is negative for the first time since records began in 2001.
Firstly records did not begin in 2001 as it is rather disappointing to see an official body like the ONS reporting that. As I shall explain later their certainly were records as how could we have seen the wages and prices spiral of the late 1970s? What they mean is that they changed the way they record the numbers.
Returning to now the main impact is below.
Growth in average total pay (including bonuses) among employees declined in April to June to negative 1.2%, with annual growth in bonus payments at negative 19.4%; regular pay (excluding bonuses) slowed to negative 0.2%.
So wages are falling and we can add to that a worse picture for June itself.
Single-month growth in average weekly earnings for June 2020 was negative 1.5% for total pay and negative 0.3% for regular pay.
In terms of sectors we are told this.
For the sectors of wholesaling, retailing, hotels and restaurants, and construction, where the highest percentage of employees returned to work from furlough, there is a slight improvement in pay growth for June 2020 compared with April and May; weaker pay growth in some higher-paying sectors negates this at whole economy level.
If we stay with the June figures then as you might well have suspected it is a much better time to be in the public-sector with wages growth of 4.2% than in the private-sector where it was -2.9% on a year before. The worst sector is construction where wages in June were 9% worse than a year ago. It is also true that there are some hints of improvement as the hospitality sector mentioned above went from -7% in May to -4% in June and construction had been -11%.
My usual caveat is that the official inflation measure is woeful due to its use of Imputed Rents and to that we need to add that somewhere around 20% of the inflation data has not been collected due to the pandemic. Indeed the official house price data series was suspended as after all who is interested in that? But what we have is this.
In real terms, pay is now growing at a slower rate than inflation, at negative 2.0% for total pay, the lowest rate since January to March 2012. Regular pay growth in real terms is also negative, at negative 1.0%. The difference between the two measures is because of subdued bonuses, which fell by an average negative 19.4% (in nominal terms) in the three months April to June 2020.
Or if you prefer it in monetary terms.
For June 2020, average regular pay, before tax and other deductions, for employees in Great Britain was estimated at £504 per week in nominal terms. The figure in real terms (constant 2015 prices) fell to £465 per week in June, after reaching £473 per week in December 2019, with pay in real terms back at the same level as it was in December 2018.
As ever they seem to have had amnesia about the total wage series where at 2015 prices we see a weekly wage of £489 in June which compares to £502 for most of the end of last year and the beginning of this. It was last at that level in May 2018. On the positive side we saw a drop in wages but the last three months have been the same ( within £1 in both series). However the negative view is that total wage growth since 2015 is now 1.3%
Employment and Unemployment
The furlough scheme has made these of little use.
A large number of people are estimated to be temporarily away from work, including furloughed workers; approximately 7.5 million in June 2020 with over 3 million of these being away for three months or more.
Unless of course you actually believe this.
the estimated UK unemployment rate for all people was 3.9%; this is largely unchanged on both the year and the quarter
If so perhaps you will let us know the other five.
“Why, sometimes I’ve believed as many as six impossible things before breakfast.” ( Alice In Wonderland)
The wages numbers tell a story but is it a truthful one? If we stay with it there is a problem highlighted by this from the LSE blog in 2015.
Figure 1 shows that median real wages grew consistently by around 2 per cent per year from 1980 to the early 2000s. There was then something of a slowdown, after which real wages fell dramatically when the economic downturn started in 2008. Since then, real wages of the median worker have fallen by around 8-10 per cent (depending on which measure of inflation is used as a deflator – the consumer price index, CPI, or the housing cost augmented version CPIH). This corresponds to almost a 20 per cent drop relative to the trend in real wage growth from 1980 to the early 2000s.
I have left the inflation measures in as by now all regular readers will be aware that things will be worse using the RPI which is why they have tried and failed to scrap it and are now trying to neuter it. So now the drop is over 25%.
The cautionary note is that the official wages series can be heavily affected by changes in composition or what we are obviously seeing right now. Rather bizarrely we are officially told this is not happening. Meanwhile the series based on taxes ( PAYE) is more optimistic.
Median monthly pay increased by 1.1% in June 2020, compared with the same period of the previous year.
Maybe there is an influence going from average to median but I suspect that it is those not paying taxes it is badly missing here. Such as it is I think we do get something from the improvement for July.
Early estimates for July 2020 indicate that median monthly pay increased by 2.5%, compared with the same period of the previous year.
So overall in terms of real pay it seems we are going to have to wait some time for Maxine Nightingale.
Ooh, and it’s alright and it’s coming along
We gotta get right back to where we started from
Love is good, love can be strong
We gotta get right back to where started from.
The Investing Channel