UK unemployment rate jumps to 4.2% as labour market cools; China’s growth beats forecasts – business live

The London stock market has made a bad start to the morning.

The FTSE 100 index of blue-chip shares has dropped by around 1.35%, or 105 points, to 7860 – its lowest level since 21 March.

Nearly every stock on the index is in the red, with miners and banks among the fallers.

The City is catching up with losses on Wall Street last night, where stocks fell again amid continuing angst that the US Federal Reserve may not cut interest rates as soon as hoped.

Shares across Europe are also in the red, with France’s CAC index down 1.8% at the open and Spain’s IBEX off 1.2%.

China’s faster-than-expected growth in Q1 isn’t cheering investors; perhaps because data for March was weaker than expected….

Labour market experts are alarmed by the continued rise in the number of Britons who are economically inactive.

The UK economic inactivity rate for those aged 16 to 64 years has risen to 22.2% in December-February, with 9.404 million people neither in work (employed) or looking for work (unemployed).

That’s 150,000 more than in the previous quarter, and 275,000 more than a year ago, today’s jobs data shows.

The ONS says the increase in the last quarter is mainly due to a rise in students and those inactive because of long-term sickness.

There are record numbers out of work due to long-term ill health, points out Tony Wilson, director at the Institute for Employment Studies.

Wilson explains:

“Today’s jobs figures are surprisingly poor, with a steep fall in employment and a sharp rise in those out of work, including an unexpected rise in unemployment.

However, most concerning is the rise in ‘economic inactivity’, which is the measure of those not in work but not looking for work, which is even higher now than it was in the depths of the pandemic. Overall there are nearly a million fewer people in the labour force than there were four years ago, and over a million fewer in work than there would have been if pre-crisis trends had continued.

The trouble is that not enough people out of work are looking for jobs, rather than that people who are looking for jobs can’t find them. In other words, the weak labour market is holding back economic growth, not the other way round.

Ben Harrison, director of the Work Foundation at Lancaster University, says the UK workforce is “sicker and poorer”, and “an international outlier”.

Harrison explains:

“A record 2.82 million people are economically inactive due to long-term sickness, and the UK is facing unresolved structural issues with labour market participation, as employers aim to fill 916,000 vacancies.

The UK continues to be an international outlier with participation rates below pre-Covid levels. Since December 2019 to February 2020, 717,000 people have become economically inactive due to ill health and the tide is not turning.

The Institute of Directors is also concerned. Alexandra Hall-Chen, principal policy advisor for employment at the IoD, says:

The rise in economic inactivity over both the quarter and the year is a worrying development for businesses, given its potential to exacerbate persistent skills and labour shortages in the UK.

The ongoing expansion of government-funded childcare is a welcome step to increasing labour market participation, but more action from government is urgently needed to increase domestic labour supply.”

UK wage growth has cooled, today’s labour market report shows, but falling inflation means that real pay is actually accelerating.

Regular pay (excluding bonuses) rose by 6.0% per year in December-February, a slowdown on the 6.1% recorded in November-January.

Growth in total pay (which includes bonuses) was unchanged at 5.6%.

But once you account for CPI inflation, real wages are rising at the fastest pace in two and a half years.

Real total pay (adjusted for CPI) was 1.8%, while real regular pay grew by 2.1% – both were last higher in July to September 2021.

Newsflash: Britain’s unemployment rate has risen to 4.2%, as the number of workers in payrolled jobs falls and more people leave the jobs market.

The latest healthcheck on the UK’s labour market shows that the unemployment total rose by 85,000 in the December-February quarter, to 1.44 million.

That takes the jobless rate to its highest level since last summer, just before the UK began sliding into a shallow recession.

The number of people in employment fell by 156,000 in the quarter to 32.98 million, as firms cut back on their workforce.

But not all those people joined the ranks of the unemployed; another 150,000 people were classed as ‘economically inactive’ in the quarter, taking the number neither in work nor looking for a job to 9.404 million.

And in March, the number of payrolled employees shrank by 67,000, to 30.3 million.

ONS director of economic statistics Liz McKeown says there are “tentative signs that the jobs market is beginning to cool”, given the drop in headline employment rate and the fall in payrolls.

McKeown adds:

“However, we would recommend caution when looking at the size of the fall in headline employment, as previously highlighted lower sample sizes mean there is greater volatility in quarterly changes than was the case.”

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

China’s economy has beaten expectations for growth in the first quarter of the year, but there are already signs that growth may be slowing.

China’s gross domestic product. grew by 5.3% in January-March compared to a year ago, data released today by the National Bureau of Statistics showed.

That beat foreasts of 4.6% increase, and shows a slight rise on the 5.2% growth recorded in the previous quarter.

China’s National Bureau of Statistics says the country’s economy had continued to rebound in Q1 2024, but also struck a cautious note:

Generally speaking, in the first quarter, the national economy made a good start with positive factors amassing, laying a strong foundation for achieving the annual development targets.

However, we should be aware that the external environment is becoming more complex, severe and uncertain, and the foundation for stable and sound economic growth is not solid yet.

However, a flurry of economic reports from March were weaker than expected, implying that demand softened at the end of the quarter.

Retail sales figures for March only rose by 3.1%, missing forecasts of 4.5% growth, while industrial production grew by 4.5%, failed to meet market expectations of 5.4% growth.

Stephen Innes, managing partner of SPI Asset Management, says:

Amidst mounting concerns over the resilience of the Chinese economy, Tuesday’s data releases from Beijing delivered a mixed bag of results, leaving investors grappling with a multitude of uncertainties.

On the one hand, China’s headline Q1 GDP figure of 5.3% exceeded expectations, suggesting a stronger-than-anticipated start to the year and providing a glimmer of hope for meeting annual growth targets.

However, the optimism surrounding GDP was tempered by lacklustre performances in other key economic indicators.

Asia-Pacific markets have fallen into the red, with China’s Shenzhen Composite index down 2.3%. Hong Kong’s Hang Seng has lost 1.5%, and Australia’s S&P/ASX 200 is down 1.7%.

Concerns over tensions in the Middle East, along with anxiety over how soon central banks will start cutting interest rates, are dampening risk appetite among investors.

The agenda

• 7am BST: UK unemployment report

• 10am BST: ZEW index of eurozone economic sentiment

• 10.15am BST: Treasury Committee hearing with Clare Lombardelli, deputy governor at the Bank of England.

• 1.30pm BST: US building permits and housing starts data for March

• 2pm BST: IMF releases its latest World Economic Outlook

• 3.15pm BST: IMF releases its latest Global Financial Stability Report