Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Britain’s Misery Index is tipped to rise later this year and through 2025, giving the next government an early headache.
Unemployment is set to increase further, puncturing the boost from inflation having fallen back to normal levels this year.
That means the Misery Index — dreamed up in the 1970s to capture the combined impact of unemployment and inflation on the population — is likely to worsen over the next 18 months.
The UK unemployment rate has already risen to its highest level in two and a half years, at 4.4% in the February-April quarter. It is forecast to keep rising; the Bank of England estimates it will average 4.6% in the second quarter of 2025, and rise further to 4.8% in Q2 2026 and 2027.
Bloomberg has calculated that this will push up the Misery Index to around 7.5 points over the first 18 months of the next government, up from six points at present.
The Misery Index has been falling under Rishi Sunak’s premiership, having hit a painful 15 (the worst since the 1990s) under Liz Truss’s administration in autumn 2022, when inflation was a 40-year high.
Andrew Oswald, a professor of economics and behavioral science at the University of Warwick, told Bloomberg:
“We still have quite strong underlying wage inflation, unemployment will have to rise to reestablish the equilibrium.
“That will be much more painful than inflation has been.”
Both major parties are promising to help working people, if they win next month’s election. Labour’s pledges include delivering a genuine living wage, updating trade union legislation, banning exploitative zero hour contracts and ending fire and rehire tactics.
The Conservatives are promising another cut to national insurance rates, maintaining the National Living Wage at two-thirds of median earnings, and creating 100,000 more apprenticeships in England every year by the end of next Parliament.
But without a pick-up in growth, economists fear unemployment will rise as firms lay off some of the staff they have been hoarding in recent years.
As Hetal Mehta, head of economic research at St. James’s Place, put it:
“Ten to fifteen years ago, if you said to people unemployment is going to be 5%, they would’ve said that’s a great outcome, but now we’re talking about unemployment rising from what was a much lower point.
It will be a difficult message for any new government to manage.”
More here: UK’s Next PM Faces Rise in Economic Misery Right After Election
The agenda
-
9am BST: IFO German business climate index
-
10am BST: IFS to publish analysis of the General Election manifestos
-
11am BST: CBI industrial trends survey of UK manufacturing
Key events
Mike Ashley’s Frasers buys THG’s portfolio of luxury goods websites
Mike Ashley has pulled off another retail deal.
Ashley’s Frasers Group has struck a deal to buy a portfolio of luxury goods websites form UK e-commerce firm THG
The two companies have also agreed a partnership across several areas including with THG Ingenuity, the online platform that serves third-party brands, and online sports nutrition brand Myprotein.
Salary offers dip for first time since October
Advertised salaries for UK jobs have fallen slightly for the first time since last autumn, according to new research which suggest the jobs market is weakening.
Jobs site Adzuna reports this morning that the average salary being offered for advertised vacancies fell by 0.1% in May, on a monthly basis, to £38,765, down for the first time since last October.
Adzuna says:
While slightly weaker salaries could help relieve some of the tightness in the UK labour market, it may also suggest increasing vacancies for entry or junior-level roles with lower salaries.
On an annual basis, salaries were 2.69% higher than in May 2023, following the rise in the National Living Wage to £11.44/hour at the start of April.
The report also found that. vacancies were increasing for teachers but falling for nurses and healthcare staff.
Andrew Hunter, co-founder of Adzuna, says:
“Hopes that a return to growth in Q1 would result in greater confidence in hiring were not reflected in job vacancies in May, which remained essentially flat. However, there were slight increases in roles in Travel, Teaching and Manufacturing – areas where there have been some entrenched staff shortages.
“The UK job market has been met with resistance in the past few months but the upcoming general election may have the potential to salvage the situation. Any outcome is likely to move the needle on the sluggish job market, with both the Conservative and Labour parties pledging to create more jobs. Sectors highlighted in their manifestos, such as Healthcare & Nursing, Energy, Oil & Gas, and Manufacturing, all experienced a vacancy drop of more than 20% year-on-year as of May 2024.”
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Britain’s Misery Index is tipped to rise later this year and through 2025, giving the next government an early headache.
Unemployment is set to increase further, puncturing the boost from inflation having fallen back to normal levels this year.
That means the Misery Index — dreamed up in the 1970s to capture the combined impact of unemployment and inflation on the population — is likely to worsen over the next 18 months.
The UK unemployment rate has already risen to its highest level in two and a half years, at 4.4% in the February-April quarter. It is forecast to keep rising; the Bank of England estimates it will average 4.6% in the second quarter of 2025, and rise further to 4.8% in Q2 2026 and 2027.
Bloomberg has calculated that this will push up the Misery Index to around 7.5 points over the first 18 months of the next government, up from six points at present.
The Misery Index has been falling under Rishi Sunak’s premiership, having hit a painful 15 (the worst since the 1990s) under Liz Truss’s administration in autumn 2022, when inflation was a 40-year high.
Andrew Oswald, a professor of economics and behavioral science at the University of Warwick, told Bloomberg:
“We still have quite strong underlying wage inflation, unemployment will have to rise to reestablish the equilibrium.
“That will be much more painful than inflation has been.”
Both major parties are promising to help working people, if they win next month’s election. Labour’s pledges include delivering a genuine living wage, updating trade union legislation, banning exploitative zero hour contracts and ending fire and rehire tactics.
The Conservatives are promising another cut to national insurance rates, maintaining the National Living Wage at two-thirds of median earnings, and creating 100,000 more apprenticeships in England every year by the end of next Parliament.
But without a pick-up in growth, economists fear unemployment will rise as firms lay off some of the staff they have been hoarding in recent years.
As Hetal Mehta, head of economic research at St. James’s Place, put it:
“Ten to fifteen years ago, if you said to people unemployment is going to be 5%, they would’ve said that’s a great outcome, but now we’re talking about unemployment rising from what was a much lower point.
It will be a difficult message for any new government to manage.”
More here: UK’s Next PM Faces Rise in Economic Misery Right After Election
The agenda
-
9am BST: IFO German business climate index
-
10am BST: IFS to publish analysis of the General Election manifestos
-
11am BST: CBI industrial trends survey of UK manufacturing
