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The Guardian
14 hours ago
- Business
- The Guardian
Reeves will hope weaker wage growth enables more interest rate cuts
The downturn in the UK's jobs market appears to be gathering pace, but the chancellor, Rachel Reeves, will hope that means slower wage growth will open the way to more interest rate cuts. Unemployment has continued to rise, the Office for National Statistics (ONS) said, ticking up to 4.6% in the three months to April, from 4.5% in the three months to March. Vacancies declined in the three months to May, the 35th successive fall – with some evidence that the downturn is accelerating, as rising employment costs, including the higher minimum wage and Reeves's £25bn employer national insurance increase, start to bite. The ONS said the 63,000 fall in vacancies was the sharpest since mid-2023, reflecting survey evidence that 'some firms may not be recruiting new workers or replacing workers who have left'. Payrolled employment – a more timely estimate, but one the ONS suggests treating with caution – declined by 109,000, or 0.4%, in May. The governor of the Bank of England, Andrew Bailey, has made clear that he sees the labour market – and specifically wage growth – as the key determinant of whether interest rates can come down, from their elevated level of 4.25%. Speaking to MPs on the cross-party Treasury select committee last week, Bailey said the question of whether pay settlements would decline through this year was, 'a crucial judgment going forward'. One dovish member of the Bank's nine-member monetary policy committee (MPC), Swati Dhingra, suggested she feared keeping rates high for such an extended period was damaging the economy. Bailey is likely to have been modestly reassured, then, to see wage growth slipping in the three months to April, to 5.2% for regular pay, down from 5.5% in the three months to March. The MPC acknowledges that interest rates are squeezing economic growth – but are nervous about cutting further until they are confident lower rates won't unleash a fresh surge of inflation. Thomas Pugh, an economist at the consultancy RSM UK, suggested the Bank is likely to continue to hold off, for now: 'a rising unemployment rate, another slump in payroll numbers, fewer vacancies and slowing wage growth paints a pretty clear picture of a rapidly cooling labour market. However, with private sector pay growth still running at almost double the rate the MPC is comfortable with, further policy easing will be gradual.' Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion Along with many analysts, he believes a rate cut could come in August – continuing with the Bank's pace of quarterly reductions. In her speech in Rochdale last week, highlighting £15bn planned investment in buses, trams and other transport links, Reeves claimed the credit for the four rate cuts the Bank has already made since she arrived in No 11, arguing her strict fiscal rules had helped. 'It is the stability that my rules supports, and the choices we made as a government in October, that have helped facilitate four cuts to interest rates since the last election – saving £650 a year for a family taking out a new, typical two-year fixed-rate mortgage,' she told bored-looking bus workers. The Treasury knows that lower rates are a key determinant of the cost of living, as well as feeding through to yields on government bonds. Reeves will be hoping wage growth continues to cool off enough to persuade Bailey and his colleagues to cut again – most likely in August – but the Treasury will also be watching nervously, in case the downturn in the jobs market accelerates.
Wall Street Journal
2 days ago
- Business
- Wall Street Journal
Global Markets Mixed; U.S.-China Trade Talks in Focus
U.S. stock futures pointed to a slightly lower open Monday after gains last week buoyed by optimism around U.S.-China trade talks, and after the U.S. jobs market held up better than expected. The main focus this week is on those trade talks in London, while U.S. inflation data for May are due on Wednesday.
Daily Mail
6 days ago
- Business
- Daily Mail
Trump demands interest rate cut as he blames Powell for shock US jobs slowdown
Donald Trump yesterday demanded a US interest rate cut as he blamed Federal Reserve chief Jerome Powell for a shock jobs slowdown. The president lashed out at 'Too Late' Powell after payroll firm ADP reported that job creation in the world's biggest economy slowed last month to its lowest level in more than two years. The outburst came as evidence also pointed to a dismal jobs market in Britain. In America, ADP figures showed that private payrolls rose 37,000 in May, the smallest gain since March 2023. Markets had expected an increase of 110,000. More comprehensive official jobs data will be published tomorrow and will be closely watched for evidence that tariff uncertainty is hurting the economy. But Trump did not wait to go on the attack. On his Truth Social platform, he said: 'ADP number out.. 'Too Late' Powell must now lower the rate. He is unbelievable. Europe has lowered nine times.' The remarks are likely to reignite disquiet over Trump's attacks on the central bank's independence. He has previously rowed back on language suggesting he would fire Powell, after a market sell-off. Meanwhile, in the UK, a survey showed employment in the private sector fell for the eighth month in a row in May, the longest losing streak – aside from the pandemic – since 2008 to 2010 during the financial crisis. The slide was partly blamed on increased payroll costs, after national insurance and minimum wage hikes introduced by Chancellor Rachel Reeves took effect. But on a brighter note, the purchasing managers' index (PMI) figures suggested a return to growth for the private sector – thanks to a recovery for services, though manufacturing declined. Tim Moore, economics director at S&P Global Market Intelligence, said the sector 'regained its poise as receding concerns about US tariffs, recovering global financial markets and greater confidence among clients helped support growth'. It came amid growing hopes of a Bank of England interest rate cut, with markets last night betting on a greater than 50/50 chance of one in August, and another cut later this year seen as increasingly likely. Today, the European Central Bank is expected to cut its rate. It has already cut seven times since last June –not the nine claimed by Trump. Figures this week showed a fall in inflation in the euro area to 1.9 per cent last month – below the bank's 2 per cent target for the first time since September.
ABC News
15-05-2025
- Business
- ABC News
Rate cut likely despite jobs surge
Samantha Donovan: The jobs market continues to show remarkable strength with the creation of 90,000 positions in April, four times the number expected by economists. The Bureau of Statistics says the unemployment rate remained unchanged at 4.1 per cent because more people were looking for work. But the resilience of the jobs market could make the Reserve Bank think twice about cutting interest rates at its meeting next Tuesday. Here's our business correspondent David Taylor. David Taylor: Workers are still in hot demand, but it's not across the economy. Erin Devlin is the next-gen board director at the Recruitment, Consulting and Staffing Association. Erin Devlin: It's an interesting jobs market at the moment. It's definitely too speed. We're seeing some areas are still seeing significant shortages of staff and other areas are really sluggish. David Taylor: Erin Devlin says administrative and executive roles are particularly hard to land right now, especially with foreign-owned companies based in Australia. On the other hand, there's significantly more demand for workers to fill public sector roles. Erin Devlin: Yeah, I think it depends where you're located in Australia. Some governments we're seeing are spending, some are pulling the purse strings back a lot. We're definitely hearing, for example, construction in some areas, you know, feel sluggish. So there's obviously not lots of spending going on in that area in some of the states. Whereas in the health sector, there's been a little bit of additional spending. It just really depends where you are. And sometimes what we're seeing is a little bit of an artificial inflation of jobs coming into the market because there is a significant investment from a government perspective, which is creating demand for those particular roles. David Taylor: Bureau of Statistics figures show 59,000 full-time jobs were created in April and 29,000 part-time roles. But the number of people looking for work also rose, which meant the unemployment rate remained unchanged at 4.1 per cent. ANZ Bank senior economist Adelaide Timbrell. Adelaide Timbrell: What it tells us is the domestic economy in Australia is stable, it's growing, and we're actually in a really good spot to handle any further challenges that come up in that uncertain global backdrop. David Taylor: The ABS made a point of saying many more women landed work in April. It was all music to the ears of the freshly minted employment minister, Amanda Rishworth. Amanda Rishworth: Today's monthly labour force figures are incredibly encouraging for the Australian economy and demonstrates the resilience of our labour market. David Taylor: But that resilience may ultimately hurt mortgage borrowers. Canberra University economist Leonore Rees says the Reserve Bank will need to take today's jobs figures into account before pulling the trigger on an interest rate cut next week. Leonora Risse: The wage price index, what's happening with wages will tell us whether or not the labour market is tight. So, at the moment, real wage growth of 1 per cent, we wouldn't necessarily interpret that as tight, we'd interpret that as healthy wage growth. So, for the Reserve Bank, I think they'll primarily be focused on inflation, what's the cash rate that will keep inflation within that 2 to 3 per cent band now that we're in there, without putting too much pressure on the economy. So, they want to make sure that cash rate is not too tight, that it's putting the brake on the economy in terms of growth. David Taylor: The financial markets have lowered their expectations that the Reserve Bank will cut interest rates on Tuesday. But the odds of a cut are still strong. Samantha Donovan: Our business correspondent, David Taylor.
Times
07-05-2025
- Business
- Times
Federal Reserve votes to keep US interests rates on hold
Officials at the US Federal Reserve expressed growing concerns that President Trump's tariffs will lead to a fresh bout of inflation and weaken the jobs market as they voted to keep interest rates on hold for the third consecutive meeting. 'Uncertainty about the economic outlook has increased further,' the federal open market committee said at the end of a two-day meeting during which officials agreed unanimously to keep the central bank's benchmark interest rate steady in the 4.25 per cent to 4.5 per cent range. 'The committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen,' the statement said. The US economy overall has 'continued to expand at a
