Good evening,
New data released today showed the US added 431,00 jobs in March, bolstering the case for the Federal Reserve to speed up the tightening of monetary policy in the fight against inflation.
The unemployment rate edged down to 3.6 per cent and now stands at its lowest level since before the pandemic. The non-farms payroll report also showed a pick-up in wage growth as businesses try to hang on to talent and fill a record number of job vacancies. Retail and airlines are among the industries boosting starting pay to attract new recruits.
A similar pattern is playing out in Europe. New eurozone data yesterday showed unemployment falling to an all-time low of 6.8 per cent. However, rising salaries are failing to keep up with galloping inflation (see below), meaning many workers in Europe face real wage cuts. Real hourly wages fell 3 per cent in the fourth quarter, the biggest drop since comparable data started 14 years ago.
In addition, many employers that depend on Russia and Ukraine for imports — such as carmakers, chemical companies and food producers — could be plunged into crisis and find themselves less able to fund big pay increases. “As far as monetary policy and inflation are concerned, there are few signs in the data that the improvement in the labour market is about to lead to a wage-price spiral,” said one economist.
The cost of living crisis is also having an effect on the make-up of the labour market. A UK survey this week from investment manager Abrdn showed the share of older workers planning to carry on working into their retirement has nearly doubled in two years thanks to insufficient pension savings as well as rising living costs.
A separate survey showed that 70 per cent of renters in the UK think their pension pot will not even cover their housing costs. “Gone are the days when everyone had a set date or a set age from which they’ll never work again,” said Colin Dyer, Abrdn’s client director.
The biggest employment story in the UK however remains the mass sacking of sailors without notice or consultation by P&O Ferries. The move exposes the UK’s “embrace of cowboy capitalism”, says Frances O’Grady, general secretary of the Trades Union Congress.
The debacle, says columnist Sarah O’Connor, shows that the country’s employment laws need a thorough overhaul to prevent a race to the bottom.
A “softly softly” approach to the enforcement of employment rights might seem to be pro-business, O’Connor writes, but it is in fact often the opposite. “Workers need a level playing field without loopholes and grey areas. Businesses do too,” she concludes.
Latest news
P&O Ferries faces criminal investigation into sacking of 800 sailors
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Need to know: the economy
Eurozone inflation hit a new record of 7.5 per cent in March, driven by a 44.7 per cent increase in energy prices, putting more pressure on the European Central Bank to tighten monetary policy. Even excluding more volatile energy, food, alcohol and tobacco, core inflation increased to 3 per cent from 2.7 per cent in February, showing that price pressures are becoming more broad-based. Use our inflation tracker to track trends across the world.
US president Joe Biden yesterday ordered the release of an “unprecedented” 180mn barrels of crude from US reserves to try and offset supply disruptions caused by the war in Ukraine. The Opec producers alliance has ignored calls from the US and UK to pump more quickly.
A decree from President Vladimir Putin insisted “unfriendly” countries pay for Russian gas in roubles, but they have until at least the second half of April to comply with Moscow’s demand. The FT editorial board said that, even if some sanctions were lifted as part of a peace deal in Ukraine, Europe’s new determination to end its reliance on Moscow’s gas will be here to stay.
Russia has however averted the flow of funds out of the country and steadied the rouble with harsh capital controls and blocks on foreign traders exiting investments. Western countries oppose linking progress in peace talks with the lifting of sanctions.
Latest for the UK and Europe
As we wrote in Wednesday’s edition, April is shaping up to be financial nightmare for UK consumers and businesses. Here’s more on how households will be affected and how companies will be hit by the withdrawal of pandemic support programmes. Energy suppliers’ websites jammed yesterday as consumers rushed to submit meter readings ahead of today’s price rises.
There was some better news for the overall UK economy as revised data showed growth was a faster than previously estimated 1.3 per cent in the final quarter of last year, meaning it had largely recovered from the damage of the pandemic. Rising inflation however meant households’ real income fell. Farmers have urged supermarkets to raise the price of eggs by 40p to help counter the cost of soaring feed prices.
UK house prices continue to soar, even if affordability is becoming an ever greater issue. The annual rate of growth of 14.3 per cent in March is the fastest in 18 years.
The European Systemic Risk Board, the body responsible for monitoring dangers to the financial system, said the war in Ukraine had raised the possibility of abrupt asset price corrections, turmoil in derivative markets and cyber attacks.
Hungary’s Viktor Orban, the EU’s longest-serving leader, is battling for re-election on Sunday in a poll seen as crucial to relations between his country and mistrustful Nato and EU allies. Six opposition parties have united to put forward a single candidate against the populist leader and are neck and neck with his Fidesz party, according to the latest opinion polls.
Global latest
The IMF said financial sanctions on Russia would dilute the dominance of the US dollar and fragment the international monetary system. The fund said the measures, including restrictions on Russia’s central bank, could encourage the formation of small currency blocs based on trade between separate groups of countries.
The Bank of Japan’s latest quarterly survey shows business confidence in the country slumping due to the mix of the pandemic, rising energy costs and the war in Ukraine. The central bank yesterday said it would boost purchases of government bonds even as the yen suffered its worst month against the dollar since 2016.
Chinese manufacturing and services activity shrunk in March for the first time in two years because of the government’s strict pandemic restrictions. Shanghai has extended lockdown measures and Hong Kong confirmed it would stick with China’s official zero-Covid policy despite some recent easing of regulations, much to the dismay of the city’s property tycoons.
Need to know: business
Global dealmaking has slumped to its lowest level since the start of the pandemic after what had been a record period of mergers and acquisitions. Just over $1tn worth of deals were struck in the first quarter of 2022 — 23 per cent lower than the same period last year, although private equity groups continue to perform well, especially in Asia. US stocks had their worst quarterly performance in two years in the first three months of this year.
US businesses in China have slashed revenue projections as Covid-19 infections continue to rage. US editor-at-large Gillian Tett says supply chain crises are forcing a change in mindset at US companies as they face up to once-unimaginable risks.
A Chinese-Australian joint venture is close to producing Australia’s first battery-ready lithium hydroxide for use in electric cars and electricity grids. The move comes as western governments have expressed concern over China’s control of the lithium supply chain. Australia is the world’s biggest exporter of the metal but has never refined the product onshore.
H&M has become one of the first consumer groups to reveal the impact of the war in Ukraine. The world’s second-largest clothes retailer said yesterday that sales growth slowed in March as the invasion hit consumer sentiment.
Huawei on the other hand has been a winner from the conflict, as Russia turns to the Chinese tech company to replace gear from western firms. Despite the threat of US sanctions, Huawei and other Chinese companies are likely to capitalise if big names such as Nokia and Ericsson fully exit the country.
One of the other major winners is of course Big Oil. “Under the so-called climate president, many US fossil fuel producers have never had it so good,” notes US energy editor Derek Brower.
Science round up
Today marked the first day of the UK’s new “Living with Covid” strategy, but also the day the number of weekly infections reached a record high of nearly 5mn. Scientists have questioned the withdrawal of free testing in the middle of a fresh wave of cases. Columnist Anjana Ahuja says living with Covid does not mean pretending it no longer exists.
People simultaneously infected with Covid-19 and influenza face double the risk of death, according to a new study. Large flu surges were suppressed during the pandemic, but experts have warned of the possibility of a rare spring or summer flu surge in the northern hemisphere.
Half of China’s elderly population is at higher risk of severe Covid-19 because of the country’s patchy vaccination campaign. China’s homegrown Sinovac vaccine was found to be less effective at preventing death from Covid-19 among the elderly than the BioNTech/Pfizer jab, unless they received three shots. Most Chinese people have received either Sinovac or Sinopharm, which also requires a triple dose.
BioNTech, which launched the first Covid-19 vaccine in partnership with Pfizer, said it would boost research and development spending by 50 per cent to between €1.4bn and €1.5bn, as it seeks to develop a new range of drugs based on mRNA technology. The company plans to return almost €2bn to shareholders through share buybacks and a special dividend following the commercial success of its Covid jab.
A new history of science eschews the traditional Eurocentric narrative and highlights contributions from around the world, including sultan and astronomer Ulugh Beg’s calculation five centuries ago of the length of the solar year to within 25 seconds of our modern value.
Get the latest worldwide picture with our vaccine tracker
And finally . . .
Eyewitness accounts from Ukraine have helped bring home some of the horrors of war to the rest of the world. Tim Judah, on assignment for the Financial Times, chronicles 21 days of the Russian invasion as events unfolded.
Source: Economy - ft.com
