Real Wages Fall at Fastest Rate Since Records Began.

Real Wages Fall at Fastest Rate Since Records Began.

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Here are this morning's headlines:

Real Wages Fall at Fastest Rate Since Records Began.

UK labour market data released this morning indicates that real wages (excluding bonuses) fell at an annualised rate of 2.8% in the three months between March and May – its highest level since records began. This translated to a 0.9% pay cut in real terms when bonuses were accounted for.

One of the primary take-homes of this morning’s data was the disparity in wage growth between the public sector and private sector which saw the latter’s wage growth grow five times higher than the former’s. This will no doubt further aggravate the tension between public sector union and the government, as a summer of strikes look set to continue.?

UK Unemployment Rate Remains Unchanged

UK unemployment figures met market expectations this morning coming in unchanged at 3.8% in the three months to May 2022. This indicates that the UK’s labour market remains strong despite concerns over the UK’s short term economic climate, with the number of those in employment rising by close to 300,000 in that same three months.

Nevertheless, the number of job vacancies continued to climb (albeit at a slower rate) to 1,294,000, indicative of the implications of what many economists are calling the Great Resignation – in addition Brexit related reductions to the supply of labour.

Equities Loose Yesterday’s Momentum

European equities have traded lower during this morning’s session as investors grabble with concerns about the economic climate and firms’ plans to cut back on jobs – especially within the tech market. Hence, the Stoxx 600 has seen a decline of 0.2% while the DAX slid 0.4%, muting the momentum gained during yesterday’s session.?

In the UK, the FTSE 100 has similarly seen a fall of around a third of a percent while the FTSE 250 has seen a 0.4% decline. Investors continue to weigh on the high volume of profit warnings issued by UK-listed companies which jumped 66% in H1 2022 from H1 2021, with 62 such warning’s being announced in Q2 alone.

Markets weigh on Tomorrow’s Inflation Figures.

Markets are weighing on tomorrow’s UK inflation data where the general market consensus is expecting a CPI print of 9.3% (0.2 percentage points above last month’s 9.1% figure) in addition to a RPI print of 12.8%. This comes as the Bank of England has warned that inflation may peak at 11%, which given the decrease in real wages will continue to exacerbate fears over the rising cost of living.

China Dumping US Treasuries

While King Dollar maintains its grip above 107 on the DXY, holding highs not seen since 2002, since the start of the year, China has dumped well over $100bn in US treasuries and now holds less than $1tn – its lowest level since 2010. Moreover, US treasuries held by foreign investors now stands at its lowest level since October 2020. That said, the Cayman Islands, Switzerland, the UK and Belgium have all seen increases in their US treasury holdings, assisted by the prevailing risk off sentiment witnessed around the world. While the DXY has cooled off this week, it is nonetheless 15.6% up on the year.???