Aurelia Butler

LONDON (Reuters) – Britain’s economy regained its pre-COVID size late last year, but in one crucial way it has not recovered: there are 400,000 fewer workers than at the start of the pandemic.This stands in contrast to most other big, rich economies where the labour force has recovered more, and adds to the Bank of England’s inflation worries after surging energy prices and other bottlenecks pushed it to a 40-year high.The central bank fears a tight labour market will limit the economy’s growth potential and put fresh upward pressure on wages, making it harder to bring inflation back to its target.People have dropped out of the workforce not for want of jobs: the number of job vacancies advertised exceeded the number of those looking for work for the first time on record this year and the unemployment rate is the lowest since the 1970s.Instead, Britain has seen a sharp rise in people reporting long-term sickness – potentially due to the after-effects of high rates of COVID – as well as an exodus of older workers and more full-time study by the young.The Bank of England is not sure any of these factors will turn around soon. And with the pool of European Union workers no longer readily available after Brexit, labour shortages risk trapping Britain in a stagflation rut.Before the pandemic, Britain enjoyed steady labour force growth and high rates of participation.The number of people employed or looking for work in Britain was 34.2 million in the fourth quarter of 2019, but by the first quarter of this year it had fallen to 33.8 million.Britain stands out here. According to OECD data, across the Group of Seven countries only Italy has seen a bigger percentage drop in the share of those aged 15-64 active in its workforce. Inactivity among the working-age population has increased in Britain by a higher margin than any of its peers.The decline in Britain’s workforce is also the longest since the early 1990s, when a recession caused unemployment to soar and some people gave up looking for work.”The persistence and scale of this drop has been a surprise to us,” BoE Governor Andrew Bailey told lawmakers earlier this month as he sought to explain why inflation is forecast to be stickier in Britain than elsewhere. a06f1014-e6b2-441a-96a6-7940d660ef7d1 UK workforce shrinks more than most in G7: https://graphics.reuters.com/BRITAIN-ECONOMY/EMPLOYMENT/xmvjoxjnxpr/chart.png SICKER BRITSSome 233,000 people left the labour market because of long-term sickness between the fourth quarter of 2019 and the first quarter of 2022, around two thirds of the total outflow. Early retirement accounted for 49,000 and full-time study for 55,000 of the departures.One category which has seen a big fall is “looking after family/home”, with 156,000 fewer people citing as a reason for leaving the workforce than in late 2019.Hannah Slaughter, an economist at the Resolution Foundation, said this could reflect how remote working in the pandemic had made it easier to juggle a job with other duties. 5d92dc04-1e12-4f05-96ca-c2281215004c2 Long-term illness is behind smaller UK workforce: https://graphics.reuters.com/BRITAIN-ECONOMY/EMPLOYMENT/lgpdwejravo/chart.png LONG COVID TO BLAME?How much of the increase in long-term sickness is directly due to COVID is hard to pin down.Around 1.8 million Britons reported in early April that they had COVID symptoms lasting more than a month, with some 346,000 saying they were so bad that they “limited a lot” their day-to-day activities, possibly a reason for those of working age to drop out of the labour market.Michael Saunders, a BoE policymaker, also suggested in a recent speech that a big rise in waiting times for non-emergency medical care due to pandemic backlogs could have made more Britons too sick to work.Directly comparable data for other countries is hard to find. Annual EU figures show no consistent trend in the percentage of those unable to work because of sickness or disability between 2019 and 2021, with a sharp fall in France but a rise in Italy, for example.A comparison with Spain might suggest the severity of the pandemic may have played a role. Spain – which had a 13% lower COVID death rate than Britain – shows a 4% rise in sickness being cited as a reason for staying out of the workforce between late 2019 and early 2022, compared with a 12% increase in Britain. e790a586-e1c0-49b8-b9c1-f01fa27e82b53 Britain has bigger rise in sickness than Spain: https://graphics.reuters.com/BRITAIN-ECONOMY/EMPLOYMENT/byvrjdxomve/chart.png NO REMISSIONBefore Brexit, the strong demand in Britain’s labour market – where wages rose by an annual 7% in the first quarter – would encourage more people into work and bring in EU workers where needed.But over the past two years the number of EU nationals working in Britain has fallen by 211,000 while the number of non-EU nationals rose by 182,000. And hiring from abroad has become tougher as almost all foreign workers now require a visa and filling vacancies quickly with those with the right skills became more challenging. Saunders said Brexit could be “limiting the extent to which domestic capacity strains and specific skill shortages can be eased through imports and inward migration”.The BoE revised down its expectations for labour force participation in its latest forecasts and sees further falls over the coming years while a looming economic slowdown caused by high inflation is expected to push up unemployment.In addition, almost all of those citing illness as a reason for not working say they no longer want a job. More

Investing.com — The U.K. government is to impose a “temporary and targeted” windfall tax of 25% on the profits of oil and gas companies, Chancellor of the Exchequer Rishi Sunak said on Thursday.Sunak said the tax scheme would raise over £5 billion in revenue. The money will go in part to funding a broader package of income subsidies for lower-income families, aimed at relieving a growing cost-of-living crisis. Setting out his proposals in the House of Commons, Sunak said the government will send a one-time £650 ($820) cost of living payment directly to around 8 million of the lowest-income households in the U.K. He also laid out plans for further handouts to pensioners and disabled people in the autumn, when regulated household energy prices are expected to show another steep increase. In addition, the government is doubling a £200 rebate promised to all households irrespective of income level.”Millions of the most vulnerable households in the country will in total receive £1,200 of support – roughly the same as the entire energy bills increase,” Sunak said. The pound hit its highest in nearly three weeks on the news, rising 0.3% to $1.2605.The shares of the two biggest U.K.-based oil and gas producers, BP (LON:BP) and Shell (LON:SHEL), shrugged off the news. BP stock rose 0.4% to its highest since February 2020, while Shell stock hit a three-year high with a gain of 0.6%.Sunak’s announcement, which had been largely anticipated, is a much-needed diversion of the news agenda from a damaging scandal around illegal partying during lockdown by senior government figures including Prime Minister Boris Johnson.The news comes a day after the publication of a damning report into the parties, which repeatedly violated the government’s own rules on social gatherings. The report was accompanied by pictures of Johnson standing at tables well stacked with food and alcohol, and included testimony of repeated drunkenness at 10 Downing St. The report’s author, a senior civil servant named Sue Gray, said the Prime Minister and Head of the Civil Service must take responsibility. Boris Johnson countered that the report exonerated him of lying to parliament about the parties, and said he wouldn’t resign. A number of Conservative lawmakers have published letters withdrawing their support for him since. More

The Monetary Policy Committee, led by Governor Sahap Kavcioglu, kept its benchmark one-week repo rate at 14%, in line with the forecasts of all economists surveyed by Bloomberg. The lira extended its drop after the decision and was trading 0.4% weaker at 16.4215 per dollar as of 2:01 p.m. in Istanbul.Deeply negative rates — when inflation is taken into account — have been a key driver of the depreciation, alongside a global rally in commodities prices and a drawdown in international reserves. The Turkish currency is the worst performer in emerging markets so far in 2022 with a loss of about 19% against the dollar.Little relief is in sight for the lira because the central bank remains set on an ultra-loose course. Kavcioglu, appointed as governor after President Recep Tayyip Erdogan ousted his predecessor for tightening policy too much, has signaled Turkey didn’t need to increase rates just because other central banks are doing so.Long championed by Erdogan, the belief that higher rates fuel price increases goes against textbook assumptions held by central bankers around the world. The Turkish government is supportive of Kavcioglu’s low-rate policy to boost growth, especially with just over a year left before elections.What Bloomberg Economics Says…“Tightening policy isn’t politically viable, despite all indicators pointing to an economy in need of higher rates. The lira could, again, pay the price for this policy error.”In place of higher rates, Turkey has relied on backdoor interventions and the introduction of state guarantees for some bank accounts to shield depositors from lira weakness. Until now, the approach ensured a period of stability. Kavcioglu has said consumer price growth, currently at a 20-year high of nearly 70%, could start slowing as early as June and disinflation will gather momentum at the end of the year.But inflows into the so-called FX-protected accounts have slowed in recent weeks and the central bank’s reserves are down sharply, leaving it with a small backstop to support the currency. Excluding swaps with commercial lenders and other central banks, Turkey’s net foreign assets have reached negative $63.3 billion, according to Goldman Sachs Group Inc.The existing policies have also done little to address the causes of a sharp deterioration in domestic confidence that has weakened the lira. As inflation spirals higher, public discontent over the management of the economy is rising.For investors, Turkey’s standoff with its NATO allies is another drag on the country’s assets. And with commodities prices soaring after the Russian invasion of Ukraine, Turkey’s current account is falling into deeper deficit, further pushing up demand for foreign exchange.The selloff has by now pushed the lira to the weakest level since a round of rate cuts contributed to its rout late in 2021. It has breached past 16 per dollar and is now at risk of weakening to 19 per greenback by the end of this quarter or soon after, according to Cristian Maggio, head of portfolio strategy at TD Securities in London.“The dire state of Turkey’s macrofinancial conditions” — from inflation to the current-account deficit and deeply negative real rates — “spells disasters to come for the lira,” he said before the latest decision.©2022 Bloomberg L.P. More

When corporate bosses descended en masse upon Glasgow for COP26, many observed — often with discomfort — that it felt something like a Scottish edition of Davos. Six months on, many of those same faces are here in the real Davos for the World Economic Forum, talking a good game on climate action in both private and public conversations. But how much progress are they making on realising the lofty pledges many of them made in Glasgow?I discussed that yesterday with Nigel Topping, who helped to pull together those private sector commitments at COP26 as the UN climate action champion, and is now working on preparations for this year’s COP27 in Egypt. It is still early to make a hard call, he said, pointing out that corporate signatories to the UN’s Race to Zero initiative have until September to lay out hard plans to reach carbon neutrality.But there were worrying signs of backsliding in some quarters, Topping said, amid calls for new investment in oil and gas as the Ukraine conflict drives surging energy prices. “Nothing scientifically says we need more gas,” he said. “The most disingenuous thing is to suggest that a starvation of investment in hydrocarbons has caused the current energy crisis.”And for all the bold words from government and corporate leaders here in Davos, he said, there is still a “big gap” between promises and hard policy that will need to be closed fast for serious progress to made in Sharm el-Sheikh.You will find more on the climate debate in Davos below, along with the latest on the push for global sustainability reporting standards, and the lowdown on a hectic day of shareholder votes in the US. We will be back in your inbox tomorrow. (Simon Mundy)Davos day 3 in briefPakistan’s foreign minister told the FT that the country wants to renegotiate a deal with the IMF, citing worsening economic circumstances. “This is a pre-Afghanistan situation deal, this is a pre-Ukraine deal, this is a pre-pandemic deal and pre-current global economic trends.”Pfizer’s chief executive Albert Bourla warned that growing complacency on Covid-19 will cost lives. “I feel . . . people are ready to compromise and lower the bar: maybe we can accept a few more old people dying,” he said.IMF deputy managing director Gita Gopinath said there was no evidence yet of a systemic sovereign debt crisis — but warned that the risk ahead was “salient”.WTO head: Rich world has ‘no excuses’ on climate finance failureOn a day thick with climate discussions at Davos, perhaps the most noteworthy remarks came from Ngozi Okonjo-Iweala, director-general of the World Trade Organization.The former Nigerian finance minister delivered a swingeing attack on the failure of developed nations to meet a pledge to provide $100bn in climate-related financial assistance to developing countries, contrasting it with the firepower they rolled out domestically in response to the Covid-19 crisis.“There was a pandemic and we suddenly saw $14tn . . . money coming out of everywhere,” she said. “It was the right policy response. But then it has bred scepticism. If the developed countries could come up with that amount of money in a short amount of time, what’s $100bn compared with $14tn? Why can’t we come up with this money? There are no excuses on this.”Okonjo-Iweala renewed her call for an international carbon pricing system — something that she said could be developed under the WTO’s auspices.Her remarks followed a session earlier in the day that grappled with the problem of how to hit the global goal of net zero carbon emissions by 2050. UN climate envoy Mark Carney added his voice to those warning against an excessive focus on divesting fossil fuel assets. “This is about real-world decarbonisation, not the false comfort of portfolio decarbonisation,” he said. “The easiest thing to do is to sell and walk away, make it somebody else’s problem.”

Anne Richards: ‘ . . . if you go back five years, the ESG agenda was a niche’ © Bloomberg

Anne Richards, chief executive of the $800bn asset manager Fidelity International, said that there had been a dramatic shift in her sector’s approach to climate issues, with most clients now keen to ensure their investments help tackle the problem. “It’s almost never that you don’t have sustainability raised as part of that conversation — whereas if you go back five years, the ESG agenda was a niche.”But a far more sceptical take on the financial sector’s transformed thinking came with a session of young climate activists, who condemned a continuing failure by corporate and political leaders to turn rousing words into action. Ecuador’s Helena Gualinga hit out against the oil companies that she said have been having a devastating impact on her Kichwa Sarayaku community — and the financial companies who continue to fund such projects.“Many, many big banks and financial institutions work directly with these companies,” she said. “Even though they’re not harming with their own hands, they’re complicit in the harm that is being done.” (Simon Mundy)Faber seeks to calm jitters on ISSB standardsThe International Sustainability Standards Board is planning to develop its new framework in a way that is practical and proportional, its chair Emmanuel Faber pledged in Davos on Wednesday.Faber promised to make the standards as streamlined and simple as possible. “We will be pragmatic,” the former Danone boss said, noting that it would be inappropriate to expect small companies to adhere to the same standards as global giants.The comments come as the issue of accounting has sparked extensive debate in Davos in private meetings and panels, since many global giants are not only racing to implement their own frameworks and metrics — but increasingly demanding that their own suppliers do this too. The recent initiatives from the SEC and European Commission have sparked particular discussion, since many corporate leaders have reservations about some of their measures, and are urging them to water them down. There is also dismay among some finance chiefs and chief executives that they are likely to need to adhere to three sets of standards in the future — from the SEC, EU and ISSB. However, nobody doubts the direction of travel, and many say that clearer frameworks could help reduce the charges of greenwashing and the risks that the SEC’s recent action against BNY Mellon has highlighted. “Words like ‘pragmatic’ and ‘proportional’ are what we want to hear,” the finance chief of one large bank told Moral Money. Whether green activists will agree, however, remains to be seen. (Gillian Tett)Quote of the dayJeremy Raguain, a fellow at the Association of Small Island States, warned a Davos audience that vested corporate interests still wield disproportionate clout over the climate-related policies of governments in large economies. “The science is clear, but there are many well-funded lobbyists,” he said. “Who’s in the room when the science is being fought over to make policy?”Elsewhere in ESG: Climate activists score wins at company meetings

Eight demonstrators were arrested at BlackRock’s annual meeting on Wednesday © Bloomberg

While demonstrations against BlackRock’s fossil fuel holdings on Wednesday were not as raucous as the protests at Shell earlier this week, eight people were arrested outside the asset manager’s Manhattan office as shareholders took part in the group’s annual meeting, activists said. Inside the meetings, shareholders endorsed agitation at companies to move faster on climate progress. On one of the biggest days in the US for annual meetings, a majority of ExxonMobil shareholders supported more disclosures about how it is affected by the International Energy Agency’s net zero 2050 models. More than one-third of Exxon shareholders also supported a report about the company’s efforts to reduce single use plastic.Shareholders at Chevron pressed the company to move faster on climate change. Thirty-nine per cent of shareholders voted for a full accounting of the company’s climate risks.“With this strong vote, investors have made it clear that companies must fully address how the global transition away from fossil fuels will affect their companies’ bottom lines and future success,” said Danielle Fugere, president of As You Sow, a non-profit that sponsored the proposal.In Silicon Valley, Amazon came up against a record 15 resolutions on environmental issues and workers’ rights — all of which were voted down by investors. But shareholders at Twitter voted for a petition demanding the company publish its political spending to lobbying organisations and other causes. The company has said it does not do political giving, but it has received low scores for political transparency. While the final chapter on the annual meetings season has yet to be written, companies have faced fire from investors when they have been unwilling to concede to demands before a vote. (Patrick Temple-West)Smart readMining company Glencore is set to shell out $1.5bn to settle charges of bribery and market manipulation. Two of its subsidiaries will plead guilty to corruption charges. It’s yet another stain on the company’s troubled reputation. But is it good news for shareholders? More

His comments to thousands of local officials at an emergency meeting Wednesday were more frank than the official readout published by state media.Li told attendees that economic growth risks slipping out of a reasonable range, according to people familiar with the discussions. He said China will pay a huge price with a long road to recovery if the economy can’t keep expanding at a certain rate. That means growth must be positive in the second quarter, he said, according to the people, who declined to be identified in order to discuss official matters. The remarks reinforce economists’ expectations that the government’s growth target this year of about 5.5% is increasingly out of reach. Beijing is holding steadfast to its Covid Zero strategy of lockdowns and other restrictions, which have brought activity in major hubs like Shanghai to a standstill. Economists surveyed by Bloomberg now expect the economy to grow just 4.5% this year, with some, like Morgan Stanley, downgrading growth to as low as 3.2%.Li listed a handful of objectives for local officials to focus on this year, including better balancing Covid controls and economic growth. He also urged those authorities to earnestly carry out policies the government has introduced in recent months to ensure economic stability. Growth is the key to solving all problems in the country, such as creating jobs, ensuring people’s livelihood, and containing Covid, he said.Here are some of the key highlights from Li’s meeting which weren’t reported by the official state media, according to people familiar with the discussions.UnemploymentLi said the spike in the jobless rate — it hit 6.1% in April, close to a record — would bring about grave consequences. While jumps are tolerable in the short term, he warned dangers would emerge should the problem last longer than a quarter. That concern, he said, means that economic growth must be positive in the second quarter, and the unemployment rate must drop.Local FinancesLi made clear to local authorities that their economies need to recover so they can generate income, adding that all aid the central government can provide has been included in the budget and it only reserved some funds for the handling of extraordinary natural disasters. Local governments need to support the resumption of work as Covid gets under control.InflationLi also stressed the need to ensure grain output does not fall below last year’s levels, as such production is key to keeping inflation in check. He told local governments to make sure summer harvesting and stocking is conducted smoothly — meaning the harvest can’t stop even if there is a Covid outbreak. Local officials will be held accountable if they can’t stabilize grain production, he warned, adding that it’s their basic responsibility. EnergyThe premier told officials to keep coal mines in operation as long as they meet work safety this summer, adding that energy would be in short supply no matter the state of the economy. Power cuts cannot happen, he added. Li also highlighted the importance of manufacturing in China, which he said was a mainstay that employs as many as 300 million people, unlike developed countries where service industries make up the lion’s share of the economy. The industrial chain must be protected, he said.©2022 Bloomberg L.P. More

The global elite gathered at Davos this week for what by all accounts has been a gloomy affair. The head of the IMF, Kristalina Georgieva, set the tone by warning against “geoeconomic fragmentation”. Among business leaders the talk is all about globalisation going into reverse. So here, in the spirit of constructive contrarianism, are some ideas to sprinkle a little nuance over the debate. Fragmentation? What fragmentation? So far, the curious thing is that fragmentation can, as Robert Solow quipped about productivity, be seen everywhere but the statistics. Start with trade, which has grown strongly from the short-term collapse in the early months of the pandemic. As the chart below shows, until the first quarter of this year merchandise trade gave little indication of deglobalisation for rich countries, China, or the 20 biggest economies (advanced and emerging) taken together. Indeed the IMF’s own research shows that the world now trades more than it had projected three years ago. For all the disruptions, real as they are, cross-border supply chains have delivered greater exports than was expected of them. Just not enough to satisfy the gargantuan shift in US (and mostly just US) consumer demand from services to goods, which is what started our current inflationary burst.We can make the same observation about financial globalisation. Banks’ total cross-border liabilities peaked in 2008 as the global credit boom turned to bust (see the chart below). But since about 2016 cross-border entanglements have been rising quickly. They admittedly came down a little bit in the past year but remain near peak levels.Of course, the world has changed since the first quarter of this year. The monthly World Trade Monitor database shows trade growth stagnated in March (but also that the momentum of world goods trade was strong until February). But does this reflect fragmentation? Of course, Russia is being cut off from global economic activity, as it should be, and more comprehensively than has happened to date. The World Trade Monitor estimates that Russia’s imports collapsed by 40 per cent from February to March. And Ukraine is having much of its trade shackled by Russian president Vladimir Putin’s assault, which beyond the sheer violence of his warfare ranges from blocking the country’s ports to stealing and destroying grain in a macabre echo of the famines engineered by Stalin in the 1930s. Apart from that, however, trade may be flat but is hardly unravelling. The slowdown in March is largely driven by China, which has had its coronavirus lockdown challenges to deal with. And the world economy as a whole is palpably slowing down, so it is natural for trade to slow as well (the World Trade Monitor estimates that world industrial production fell 1 per cent in March, much more than the 0.2 per cent fall in goods trade). But that is an effect of the economic cycle, not the level of cross-border integration.Deglobalisation does not produce resilience. Even if fragmentation exists largely as a threat in the minds of the Davos Men and Women, that is not to say they are wrong to be worried. There are clearly political pressures to reverse globalisation. These existed before the pandemic and Putin’s war but were strengthened by how these revealed just how economically interdependent we were.As I wrote early in the pandemic, however, resilience to shocks and autonomy from geoeconomic pressure can be assured not just by self-sufficiency, but also by a combination of stockpiling and diversification. And both of those are easier to achieve when you can source from many countries and not just your own. If the worry is being held economically hostage by hostile governments, this can be addressed not by trying to “reshore” all your supply chains but by reorganising them around the economies of allied countries — what US Treasury secretary Janet Yellen calls “friend-shoring”.If, instead, you pursue resilience through self-sufficiency, you risk ending up with neither. The scandal of baby formula shortages in the US has just served up a perfect example of this, as my colleague Brooke Masters explained in a recent column.There is fragmentation and there is fragmentation. Globalisation means two things. Conceptually it means the economic integration of national economies — deepening cross-border flows of goods, services, capital and people — especially between countries at different levels of economic development. But sometimes it is taken more literally to mean this process involving the whole world. Bear this in mind and you can see that it is possible to “deglobalise” (in the latter sense) without “deglobalising” (in the former sense). Yellen’s friend-shoring is an illustration of this.There is a lot of pressure to friend-shore. Look no further than the EU’s plan to reconfigure its energy system. It aims to end energy imports from Russia, but it does so in part by intensifying other regional and global trade in energy, in particular finding new suppliers for imports of natural gas today and hydrogen in the future. Look, too, at the efforts among democracies to agree rules of the road for the digital economy and the handling of sensitive data, which may lead to fewer digital transfers between democracies and non-democracies while deepening data connectivity within these blocs.So it looks very plausible that the global economy may be reorganised along big regional blocs defined not just by geography but by common values and governance. That would be “deglobalisation” in the literal sense. But it would involve more globalisation in the economically meaningful sense — that of deepening cross-border economic integration. “Regionalised globalisation” would be a better term.The question, then, would be whether further globalisation within such regional, politically delineated blocs could be as efficient and productive as a literally global integrated economy. My hunch is that for the advanced economies centred on the transatlantic west, the answer is yes — and that there is much more doubt for less advanced economies. But that is, to be sure, an uncertain gamble. If regionalised globalisation is the way we are headed, we shall find out whether China needs the west more than the west needs China.Other readablesIn my FT column this week I explain why the EU’s new plan to reconfigure its energy system away from dependence on Russia is a good one — but that more fresh money is needed. Sylvie Kauffman sets out how two schools of thought have emerged in Europe on what victory against Russia in Ukraine should mean.Numbers newsOutput shrank in the first quarter in the G7 biggest advanced economies taken together. All OECD countries together only managed to grow by 0.1 per cent.And this week’s purchasing managers’ indices indicate that UK economic activity is screeching to a halt. More

Government bond markets have clawed back part of this year’s heavy losses in recent weeks as investors’ attention shifts from sky-high inflation to signs that economic growth is slowing. Bonds have endured a painful year so far as major central banks rush to contain runaway price rises by embarking on a rapid tightening of monetary policy. But longer-term government debt — an ultra-safe asset which tends to benefit from fears over the health of the economy — has steadied in recent weeks as a sell-off in riskier assets like stocks accelerates.A Bloomberg gauge of long-term US government bonds is on course for a third consecutive weekly rise, gaining more than 4 per cent since May 6, a turnround echoed in European markets. Although the recovery remains modest compared with the scale of earlier declines — the index is more than 18 per cent lower year-to-date — some investors sense a turning point for the heaviest global bond sell-off in decades.“We have rarely been as bullish on government bonds as we are now,” said Mike Riddell, a senior portfolio manager at Allianz Global Investors. “If growth slumps, then inflationary pressure will recede, and yields look more attractive than they have in a long time.”The US 10-year government bond yield — a benchmark for financial assets around the world — has fallen to 2.71 per cent from a high of 3.2 per cent two weeks ago. On Thursday, it reached the lowest level since mid-April. The equivalent German yield has also declined, from nearly 1.2 per cent to 0.96 per cent.

Even though the Federal Reserve is still in the early stages of raising interest rates — while the European Central Bank has yet to lift borrowing costs from record lows — the anticipation of aggressive policy tightening has already had a big impact on markets and the economy, according to Riddell, who cited the example of a drop in US home sales as mortgage rates surge.“Over the past month, we went from inflation woes dominating to recession fears increasingly being the cause for concern,” said George Goncalves, head of US macro strategy at MUFG Securities. “It’s possible that we have hit the cycle high for the [US] 10-year yield and it’s more likely we continue to slide lower in long-term rates into the summer months.”While inflation in the US remains close to its highest level in decades, market expectations of longer-term inflation have begun to ease. The five-year, five-year forward break-even rate — which is a gauge of inflation forecasts over five years, five years from today — fell on Wednesday to 2.2 per cent, its lowest level since March 1. It had reached an eight-year high in mid-April. In the US, evidence of an impending slowdown has mostly been seen in company earnings reports — like that of retailers Walmart and Target, or social media group Snap’s growth warning this week. But the economic data may be starting to turn. The S&P purchasing managers’ index on Tuesday showed business activity in the US, the UK and the EU all falling in May. More

Apple will increase pay for its workers in a bid to deal with inflationary pressures, unionisation efforts among employees and increasing competitiveness in the labour market.The iPhone maker told staff on Wednesday that the hourly pay for US retail workers would rise to $22 per hour or more — up 45 per cent from 2018.Rates outside the US, as well as starting salaries, are part of the planned increases but Apple declined to provide any details or disclose the size of its overall compensation budget.The company will also pull forward some annual increases to July rather than in the autumn.“This year as part of our annual performance review process, we’re increasing our overall compensation budget,” Apple said.Apple announced the changes a week after a similar initiative from Microsoft. The iPhone maker’s plans were first reported by the Wall Street Journal.Labour shortages coupled with the fallout of the coronavirus pandemic and homeworking trend have resulted in a strengthening of the worker’s moment in the US, with staff more willing to challenge employers and push back against policies to force them back to the office.Apple staff have become increasingly vocal about working conditions at a number of its US stores, including the Grand Central location in New York, and have begun the process of forming unions.The workers have launched a website called Fruit Stand Workers United to collect signatures and demand “better wages, benefits, and working conditions from Apple”.Employees have cited the impact of Covid-19 and “once-in-a-generation consumer price inflation”, which has hit a 40-year high of 8.3 per cent in April.Apple Store workers said they were galvanised by successful efforts at Starbucks, where staff at dozens of stores in at least 19 states have taken steps to form unions.

Greg Selker, managing director at law firm Stanton Chase, said the pandemic had “supercharged” multiple trends contributing to both workers and corporations re-examining pay, benefits and the use of physical spaces.“All of these factors have led to a shift in the balance in terms of hiring and seeking new employment, where the power is now much more in the hands of the sought-after employees than anywhere else,” he said.Amazon has also been under pressure. In December, the National Labor Relations Board required the ecommerce giant to post public notices telling employees they had the right to organise with colleagues without interference. More