FTSE 100 rises 0.4pc
Ambrose Evans-Pritchard: Germany is the surprise success story of this energy crisis, not that Labour has noticed
Just one in five trains will run due to strikes on Thursday and Saturday, with only half of lines across Britain open.
Network Rail confirmed that only 20pc of services will operate due to a walkout by members of the Rail, Maritime and Transport (RMT) union.
There’ll also be a knock-on impact on days after the strikes, with service levels at only 70pc on Friday and 85pc on Sunday.
The warning paves the way for more travel chaos after a string of strikes shut down services on London's Tube and the UK rail network. Passengers have also faced delays and cancellations as a result of the recent heatwave.
It comes as new data showed 2022 has been the worst year for train reliability in Britain since records began.
Analysis by PA showed 3.6pc of planned trains were cancelled in the 12 months to July 23 amid repeated strikes, severe weather conditions and Covid-related staff absences.
That's all from us today, thank you for following! Before you go, check out the latest stories from our reporters:
Europe's biggest zinc smelter to power down because of energy costs
One of Europe’s largest zinc smelters is stopping production as surging energy costs pummell heavy industry. Rachel Millard reports:
Nyrstar said it would put its Budel smelter in the Netherlands on “care and maintenance” from September 1.
Nyrstar, which is owned by the commodities trading giant Trafigura, put the decision down to “various external factors”. It did not go into details but sources told Reuters its electricity costs have climbed as much as ten-fold while labour and other costs have also risen.
Power prices in Europe have been exceptionally high since last year due to gas shortages significantly worsened by Russia’s war on Ukraine.
FTSE 100 boosted by mining stocks
The FTSE 100 has ended near a 10-week peak as strong results from BHP sparked a rally in mining stocks. The commodity-heavy index rose 0.4pc to 7,536.
BHP jumped 5.5pc after the world's largest miner reported its strongest profit since 2011 on the back of gains in prices of coal and other commodities. The stellar results lifted peers such as Rio Tinto, Glencore and Antofagasta.
Joshua Mahony at IG said: "While economic concerns have brought volatility in the commodity space, the recent Russia-Ukraine war has helped drive demand for alternate energy such as coal and gas.
"The forward-looking nature of markets should mean that investors look beyond any short-term weakening in favour of a 2024 recovery."
Phoenix leads investor rebellion to oust boss of insurer
A City money manager is leading an investor rebellion to oust the boss of London-listed insurer R&Q. Simon Foy has the story:
Phoenix Asset Management, which holds a 12pc stake in the life insurer previously known as Randall & Quilter, has called for executive chairman William Spiegel to be removed and replaced by Ken Randall, the company’s founder and former executive chairman.
In an open letter, Phoenix said: “We and other investors have seen the performance of the business deteriorate under the leadership of William Spiegel.
“We are therefore calling for a general meeting to be held at which resolutions will be proposed for William Spiegel to stand down and a new executive director be appointed."
Phoenix said Mr Spiegel was "not the right person to be leading the company" and called for a return of Mr Randall, who retired last year.
“We have confidence and trust in Ken Randall, the company’s founder and former executive chairman. We seek his reappointment to the board as an executive director.”
Oil majors' climate visions 'inconsistent' with Paris targets, says study
Global decarbonisation scenarios envisioned by oil and gas majors are incompatible with the Paris climate deal goal of limiting heating to "well below" 2C, according to a study.
Writing in the journal Nature Communications, an international team of experts analysed six emissions scenarios from Equinor, BP and Shell, as well as those produced by the International Energy Agency.
"Most of the scenarios we evaluated would be classified as inconsistent with the Paris Agreement as they fail to limit warming to 'well below 2C', let alone 1.5C, and would exceed the 1.5C warming limit by a significant margin," said Robert Brecha of the Climate Analytics think tank, and co-lead author of the study.
"Energy system transformation is critical to reaching the Paris Agreement warming limit, and decision makers need sound and transparent scientific assessments. This paper adds to that transparency."
Watches of Switzerland enjoys strong demand for luxury watches
Watches of Switzerland said demand for luxury watches has remained strong despite cost of living pressures.
The retailer plans to move its flagship West End store to a much bigger site amid optimism about future demand.
The Rolex Boutique on Bond Street, which is currently 900 square feet, will relocate to a new 7,200 square feet space nearby on Old Bond Street.
Revenues surged by 31pc to £391m over the three months to July, buoyed by particularly strong growth in the UK as it benefited from pent-up demand from customers at its showrooms.
Fears grow over ports crisis ahead of Felixstowe strike
Strike action at Britain’s biggest port next week will disrupt shipments of everything from clothing to chemicals, with alternative docks already fully booked out. Helen Cahill reports:
Port operator DP World warned it only has limited capacity to accept deliveries displaced by strikes at Felixstowe port next week.
Hundreds of workers will walk out in protest at a 7pc pay rise. Felixstowe, which is ultimately owned by Hong Kong billionaire Sir Ka-shing Li, is Britain's largest container port and is responsible for accepting almost half of the country's container traffic.
Dubai’s DP World, which operates the London Gateway and Southampton ports, said it only has "minimal spare capacity" to take shipments from companies unable to dock at Felixstowe.
London Gateway and Southampton represent the two main alternative destinations for shipments. Both ports are operating at maximum capacity ahead of the strike action organised by Unite.
That's all from me for today – thanks for following! Handing over now to Giulia Bottaro.
Iceland to let shoppers pay for food in instalments
Iceland will allow customers to pay for their groceries in instalments as consumers struggle with surging food bills.
The Iceland Food Club will offer interest-free loans ranging between £25 and £100, accessible through a pre-loaded card, with repayments set at £10 a week.
The move makes the budget supermarket chain one of the first to enter the burgeoning buy-now-pay-later market.
Figures released earlier today by Kantar revealed grocery price inflation has hit its highest since 2008, adding £533 to the average annual bill.
Richard Walker, managing director at Iceland, said:
More than ever, people are struggling to purchase much-needed everyday items during this relentless cost-of-living crisis. We have rolled out Iceland Food Club to offer our customers even more support.
Suitor walks away from FirstGroup deal after £1.2bn bid rejected
I Squared Capital Advisors has walked away from a potential takeover of transport giant FirstGroup after its bid of around £1.2bn was rejected.
The Miami-based infrastructure investment firm is now bound not to return with another offer for a fixed period, unless another bidder enters the fray.
Shares in FirstGroup slumped as much as 17pc after the announcement.
The bus and train operator has attracted interest after pulling out of the US under pressure from activist investors. Last year it sold its iconic yellow school bus business for $3.6bn, followed by the disposal of struggling coach group Greyhound.
Profits soar at world's biggest miner
The world's biggest miner will give shareholders its largest ever annual pay out after profits climbed 26pc helped by rising coal prices.
Rachel Millard has more:
BHP will pay an annual dividend of $3.25 per share, amounting to a record $16.5bn, after annual profits rose 26pc to $21.3bn.
Coal prices have leapt after Russia’s invasion of Ukraine disrupted markets and forced a return to coal-fired power plants. Most of the coal produced by BHP is the type used for steelmaking, but it also produces coal used in power stations, from mines in New South Wales, Australia.
BHP was planning to sell off the latter mines due to pressure to cut carbon emissions but announced in June it would keep hold of them after failing to find a buyer. It sold coal at three or almost four times the price this year compared to last, according to its results.
Rival miners including Glencore and Thungela Resources have also benefited from the surging coal prices, with Thungela’s profits rising almost 3,000pc.
US stocks slip as retail earnings kick off
Wall Street has opened largely in the red as investors assessed the latest US retail results from Walmart and Home Depot alongside signs of a slowing economy.
The S&P 500 slipped 0.2pc, while the Nasdaq was down 0.4pc. The Dow Jones bucked the trend, ticking up marginally.
LME blocks Russian nickel brands from UK warehouses
The London Metal Exchange will suspend deliveries of Russian nickel brands in its UK warehouses with immediate effect.
The move, which will impact brands including Nornickel, is a largely symbolic response to the Government's imposition of an additional 35pc duty on imports of Russian nickel.
There's no metal currently in LME-listed warehouses in the UK that would be affected by the new rules, and the measure won't apply to any metal that can be proven to have left Russian before July 20.
Gas prices keep surging as energy crisis deepens
Natural gas has extended its rally as a heatwave across Europe drives up demand and exacerbates an energy crisis that's threatening to push countries into recession.
Benchmark prices surged as much as 11pc, while the UK equivalent jumped 16pc. European electricity prices also hit a record high of more than €500 per megawatt-hour.
Hot and dry weather is causing river water levels to drop rapidly, hampering the transport of fuels like coal. That could cause companies to use more gas as a replacement at a time when supplies from Russia are already limited.
Walmart boosts profit forecasts as discounts draw in shoppers
Walmart has beaten expectations for profit in its latest quarter and nudged its forecasts slightly higher after it won over shoppers with discounts.
The US retailer spooked markets last month when it forecast a drop in earnings per share of between 11pc and 13pc and warned consumers were cutting spending sharply amid soaring inflation.
That forced Walmart to make steep price cuts on items such as clothing to try to reduce more than $61bn worth of inventory it was sitting on at the end of the first quarter.
This helped boost sales by 8.4pc to $152.9bn in the second quarter. The company said it now expects full-year earnings per share to fall by no more than 11pc.
Booming private healthcare companies race to benefit from chaos in the NHS
With almost 200 beds, a small army of medics, state-of-the-art equipment and views of Buckingham Palace, almost no expense has been spared at London’s newest hospital.
But the six-storey Cleveland Clinic London is a private, not public, medical centre – and just one of several that have opened across Britain as yawning NHS waiting lists create an opportunity for independent healthcare providers.
“The opening of our London hospital was an eventful moment,” says Brian Donley, chief executive of the new facility.
“We are excited to be bringing our unique model of care to the UK and since the hospital opened, we’ve seen strong demand for our services.”
Cleveland is one of several independent healthcare organisations launching new services just as demand is beginning to boom.
Matt Oliver and Hannah Boland report on the private healthcare boom. Read their full story here.
UK pauses overseas aid payments amid overspend worries
The Government is said to have halted overseas development aid that's not considered critical due to concerns about mounting pressure on finances.
The Foreign Office told staff a freeze was necessary because crises including the war in Ukraine had led to additional expenditure that left the Government at risk of overspending, Bloomberg reports.
Any payments above £1m are barred unless critical to life or unless their blockage leads to additional costs, while new contracts and activity linked to agreements that have yet to start are also being paused, according to the report.
The Government said it was “currently prioritising essential overseas aid funding such as providing humanitarian support to the people of Ukraine”.
Watchdog drops case against Barratt in leasehold mis-selling scandal
An investigation into alleged mis-selling by housebuilder Barratt has been dropped by the competition watchdog after it found "insufficient" evidence to take legal action.
Four of the UK's biggest housebuilders came under scrutiny from the Competition and Markets Authority (CMA) more than two years ago as it probed the leasehold housing market.
It followed allegations that large developers had broken consumer protection laws by mis-selling leasehold homes and using unfair contract terms which tied some leaseholders to homes they could not sell.
In December, housing giant Taylor Wimpey agreed to scrap terms from leasehold contracts which caused ground rents to double in price every decade.
And 15 more businesses committing to removing the unfair terms in March, effectively freeing thousands more leaseholders from spiralling ground rents which trapped them in unsellable homes, the CMA said.
But the watchdog reported that it has closed the case against Barratt Homes and will not be pursuing a legal case.
The CMA said: "Following careful scrutiny of the evidence gathered, the CMA concluded that it was insufficient to support a clear legal case for the CMA to secure collective redress for Barratt leaseholders under its consumer law powers.
"Barratt's sales practices have changed, and they no longer sell leasehold houses."
US futures decline amid economy worries
US futures fell this morning as investors fretted over signs of an economic slowdown even as the Federal Reserve sticks to its path of aggressive interest rate rises.
A sharp drop in New York state manufacturing – the second-worst reading since 2001 – along with the longest streak of declines since 2007 in homebuilder sentiment, sparked short-lived optimism in the equity markets that the Fed may slow interest-rate hikes.
However, it was soon outweighed by fears of a recession and belief among some traders the Fed could still press ahead with its tightening irrespective of a slowdown.
Futures tracking the S&P 500, Dow Jones and Nasdaq all slipped 0.2pc.
German power soars to record €500
Europe's benchmark power price has surged above €500 for the first time ever as the continent's energy crisis keeps escalating.
German year-ahead power rose as much as 5.2pc to €502 per megawatt-hour this morning. That's roughly a 500pc gain over the last year, driven primarily by Russia's cuts to gas supplies.
The figures will raise fears of potential blackouts this winter. Output from France's nuclear reactors is on course to be the lowest in decades, while hydropower stocks in some countries are also at multi-year lows.
Hedge fund Elliott ditches SoftBank stake
Hedge fund Elliott Management is said to have dumped almost its entire stake in SoftBank in a fresh blow for the Japanese group's founder Masayoshi Son.
The activist investor has sold down the vast majority of its remaining shareholding, the Financial Times reported. It had accumulated a stake of almost $3bn (£2.5bn) by February 2020.
The move comes just eight days after SoftBank reported a record loss for the first quarter after markdowns in the valuations of its tech-focused Vision Fund.
According to the report, Elliott's decision came after it lost conviction in Mr Son's ability to close the huge gap between the value of SoftBank's holdings and its market capitalisation.
German investor morale falls amid recession fears
German investor sentiment fell slightly in August amid an escalating cost-of-living crisis and fears of a recession.
The ZEW institute's economic sentiment survey fell to -55.3 points from -53.8 in July.
Europe's largest economy stagnated in the second quarter, with the war in Ukraine, surging energy prices and supply disruptions pushing it to the brink of a downturn.
Michael Schroeder at ZEW said:
The still high inflation rates and the expected additional costs for heating and energy lead to a decrease in profit expectations for the private consumption sector.
In contrast, the expectations for the financial sector are improving due to the supposed further increase in short-term interest rates.
Apple orders staff back to the office - again
Apple has ordered staff back to the office three days per week after a year-long back and forth with employees over winding down working from home at the iPhone maker.
Chief executive Tim Cook told employees in the Silicon Valley area they will be expected to come in on Tuesdays and Thursdays and one extra day each week, starting on September 5.
Apple has faced a wave of employee discontent over its efforts to get staff back at desks. The company first started trying to launch a so-called "hybrid" work model in June last year, but it has been beset by delays.
At the time, staff claimed they were being "ignored" over the company's effort to get people back to the office and warned its policy was driving people to quit.
“Without the inclusivity that flexibility brings, many of us feel we have to choose between either a combination of our families, our well-being, and being empowered to do our best work, or being part of Apple,” the employees wrote.
In May, Ian Goodfellow, Apple's director of machine learning , left the company amid disagreements over its flexible work policy.
Bloomberg first reported Apple's new policy.
Chancellor welcomes jobs market figures despite stagnant wages
The Chancellor, Nadhim Zahawi, has welcomed the latest jobs figures despite a record fall in the real value of workers wages.
Today’s stats demonstrate that the jobs market is in a strong position, with unemployment lower than at almost any point in the past 40 years – good news in what I know are difficult times for people.
This highlights the resilience of the UK economy and the fantastic businesses who are creating new jobs across the country.
Although there are no easy solutions to the cost of living pressures people are facing, we are providing help where we can. We are delivering a £37 billion package of help for households through cash grants and tax cuts so people can keep more of what they earn.
And whilst we cannot completely shield everyone from these global economic shocks, we are targeting this support on millions of the most vulnerable people in our society: those on the lowest incomes, pensioners and disabled people.
Ryanair adds flights to Stansted in response to Heathrow passenger cap
Ryanair will add an additional 500 flights serving London Stansted during the Ocotober half-term holiday after Heathrow extended a cap on passenger numbers.
The Dublin-based airline said the extra flights would provide capacity for 100,000 passengers.
Heathrow said on Monday that a cap on daily departing passengers of 100,000 introduced in July due to staff shortages would continue until the end of October.
The cap over the summer forced airlines to cancel hundreds of flights and stop selling tickets to popular destinations. Heathrow's passenger cap will now disrupt half-term holiday plans.
Ryanair chief executive Michael O'Leary said:
While hopeless Heathrow continues to cut flights and raise fares for families, Ryanair and London Stansted continue to add flights, and offer thousands of low-fare seats for the autumn mid-term break.
With over 500 additional flights, more than 100,000 additional seats and prices starting from just 29.99 euros (£25.29), Ryanair looks forward to welcoming thousands of additional families during the autumn mid-term break on its low-fare flights to/from London Stansted Airport.
While hopeless Heathrow continues to mismanage air travel, Ryanair and London Stansted will continue to grow and deliver for London families, the way we have through all of summer 2022.
Matt Oliver has the full story: Ryanair puts on extra flights from Stansted amid Heathrow chaos
Amazon claims US regulators are harassing Jeff Bezos
Amazon has accused US regulators of “harassing” Jeff Bezos as part of an investigation into the online retailer’s Prime service.
The US company claimed the Federal Trade Commission had undertaken a campaign to "harass Amazon's highest-ranking executives and disrupt its business operations" as part of its inquiry.
The regulator is said to have demanded information from Mr Bezos, Amazon's founder, and its chief executive Andy Jassy as part of its investigation into anticompetitive practices on Amazon Prime.
The regulator is digging into whether Amazon uses misleading techniques to encourage customers to sign up for the £79 per year service, and whether it makes it hard to unsubscribe.
In a filing with the regulator, Amazon said the investigation had become "unduly burdensome" on senior staff members. It said the FTC was demanding Mr Bezos and Mr Jassy provide "granular" details on Amazon's business operations with only a few weeks to comply.
Mr Bezos and Mr Jassy, as well as other senior Amazon executives, have been served with subpoenas by the regulator.
Under its new 32-year-old firebrand chief Lina Khan, the FTC has pledged to take on Big Tech companies and launched multiple investigations into the technology sector.
The FTC is also investigating Amazon's Kindle subscription service and its music product. It has launched probes into Facebook's takeover of a tiny virtual reality company. Ms Khan has pushed for tougher scrutiny of tech takeovers.
Business Insider first reported the filing.
Pound falls after jobs data
Sterling has slipped against the dollar and euro after the latest jobs data showed a tight jobs market and another record fall in real wages.
While job vacancies eased for the first time in two years, they remain very high by historical standards.
Derek Halpenny at MUFG said that for the Bank of England the data will make for "uncomfortable reading in the sense that wage growth was certainly stronger than expected".
Markets also have an eye on inflation figures due tomorrow.
The pound fell 0.2pc against the dollar to $1.2031. Against the euro, it was down 0.1pc at 84.32p.
Non-UK workforce rebounds after pandemic
Another intriguing detail in the ONS data is evidence that the non-UK workforce rebounded in the latest quarter.
As Samuel Tombs at Pantheon Macroeconomics points out, that suggest the pandemic has had a much bigger impact on immigration to the UK than Brexit.
Very encouraging to see the size of the non-U.K. national workforce rebound in the three months to June, offsetting continued weakness in domestic labour supply. Suggests Covid has been a much bigger dampening influence on immigration over the last 2 years than Brexit. pic.twitter.com/XFIsaNKRZ5
— Samuel Tombs (@samueltombs) August 16, 2022
Retirees flock back to the workforce
Just last week, John Lewis boss Dame Sharon White called on people who retired during the pandemic to rejoin the workforce.
The latest ONS stats suggest they've done just that.
While there was a drop in the number of 16-24s in employment dropped over the last quarter, there was a huge 173,000 surge in the number of over-65s in work.
The data would appear to show that the escalating cost-of-living crisis has forced many out of retirement and back into work.
The most extraordinary thing in today's UK labour market data
Quarterly change in employmeny
16-64 yr olds: -14,000
Aged 65+ : +173,000
Either this is cost of living crisis biting hard - or rubbish data -
What do you reckon @ONS?
— Chris Giles (@ChrisGiles_) August 16, 2022
Darktrace surges on takeover talks
Darktrace is the biggest market mover this morning as investors welcomed a potential takeover offer.
The British cybersecurity giant said it’s in early talks with US private equity firm Thoma Bravo. Shares leapt more than 20pc.
Thoma Bravo has until September 12 to say whether it plans to make a bid. Darktrace added that it’s received “a number of preliminary and conditional proposals”.
Read more on this story: US private equity firm in swoop for British tech company Darktrace
FTSE risers and fallers
The FTSE 100 has hit a fresh two-month high even as the latest jobs data highlighted the threat of a slowing economy.
The blue-chip index rose as much as 0.4pc despite figures showing companies were growing more cautious over hiring and real wages tumbled at a record pace.
Miners provided the biggest boost after BHP Group reported its highest profits since 2011 thanks to surging commodities prices.
Glencore and Rio Tinto were among the biggest risers, while defensive stocks such as GSK and British American Tobacco also gained ground.
The FTSE 250 ticked up marginally, with Darktrace surging more than 20pc after the cybersecurity firm said it was in talks with US private equity firm Thoma Bravo over a possible takeover.
Ted Baker agrees £211m sale to Authentic Brands
Ted Baker has finalised a £211m takeover by US retail group Authentic Brands in a cut-price deal that could secured the future of the struggling fashion chain.
Authentic Brands, which owns Juicy Couture, offered 110p per share for Ted Baker, representing a premium of about 18pc to yesterday's closing price.
Shares in Ted Baker jumped around 17pc in early trading.
Authentic Brands previously held talks over a potential takeover and indicated it was willing to pay a higher price, before walking away from the deal.
Private equity firm Sycamore Partners bowed out of the sale process earlier in the year after offering as much as 137.5p a share.
Authentic Brands, which owns marketing and licensing rights to names like David Beckham, has been a key consolidator in the retail industry. Last year it bought Reebok from Adidas in a $2.5bn deal.
Reaction: More work needed to tackle inflation
Neil Carberry, chief executive of the Recruitment & Employment Confederation, says staff shortages will hold back growth and drive up inflation.
These figures further emphasise the need to tackle inflation and its effects on companies and workers. Private sector pay is growing at a robust pace – but increases are being eaten up by the current inflation rate.
The overall picture is still positive for those looking for work or to change jobs to raise their pay. Unemployment is low and stable, and while the number of vacancies seems to have peaked, there are still almost 1.3m of them available.
But firms are struggling with staff shortages, and that will constrain growth and drive inflation. Employment is still much lower than pre-pandemic, while the number of people out of work and not looking for a job is much higher.
Firms need to think carefully about their offer to potential staff in this environment, working with their recruiter. It’s clear that flexible forms of employment have a big role to play in closing the gap.
There is a role for government too – measures to support a sustainable labour market for the long term, for example on skills, immigration, childcare costs and local transport are all part of the solution.
Grocery price inflation hits highest since 2008
In more grim evidence of the cost-of-living crisis this morning, grocery price inflation has surged to 11.6pc – its highest since at least 2008.
The price rises, which are the biggest since Kantar started collecting data 14 years ago, mean households are now paying an extra £533 per year on their supermarket shop. Prices are rising fastest for staples such as butter, milk and poultry.
The crisis has driven more people to own-label products to help keep their spending in check.
Sales of supermarkets' own lines grew 7.3pc in the 12 weeks to August 7 and now hold 51.6pc of the market compared to branded products – the highest on record.
Fraser McKevitt, head of retail and consumer insight at Kantar, said:
Over the past month we’ve really seen retailers expand and advertise their own value ranges across the store to reflect demand.
It’s not surprising that we’re seeing shoppers make lifestyle changes to deal with the extra demands on their household budgets.
FTSE 100 opens higher
The FTSE 100 has started the day on the front foot, even as the latest jobs data showed more signs the cost-of-living crisis could spark a recession.
The blue-chip index rose 0.3pc at the open to 7,534 points.
Reaction: Labour market still very tight
Ruth Gregory, senior UK economist at Capital Economics, says the latest figures are "further evidence that the weaker economy is leading to a slightly less tight labour market".
That said, by any metric the labour market is still very tight. And the robust rise in employment in June together with the acceleration in wage growth will heap pressure on the Bank of England to raise interest rates by 50 basis points rather than 25 basis points at the next policy meeting on 15 September.
The three-month year-on-year rate of average earnings growth fell from 6.4pc in May to 5.1pc in June. But the rate excluding bonuses accelerated from 4.4pc to 4.7pc. That is stronger than the 4.5pc rate that we and the consensus had assumed.
With wage growth running well above the rates of 3.0-3.5pc that are consistent with the 2pc inflation target, it supports our view that the Bank of England will have to raise interest rates further than most anticipate to 3pc.
Record fall in wages as cost of living soars
Workers suffered a record fall in the value of their wages in the three months to June as price rises rampaged further ahead of pay packets, as my colleague Tim Wallace explains.
In cash terms, regular pay picked up a little more pace to grow by 4.7pc in the quarter compared with the same period of 2021, marking the strongest growth since September last year.
But at the same time inflation accelerated to hit a new four-decade high of 9.4pc in June, with price rises far outstripping any rise in average earnings.
In real terms, regular pay in the quarter dropped by 3pc compared with the same period last year, the ONS said, which is the steepest drop since records began in 2001.
Once bonuses are included, total pay in cash terms rose by 5.1pc, the slowest growth since January. After inflation, this is a drop in real terms of 2.5pc, worse than any time except the financial crisis when bonuses were slashed in financial services.
The economy has still not returned to its pre-Covid levels of employment. The ONS found 32.8m people in work in the three months to June, up on the quarter but still 281,000 short of the peak of more than 33.1m employed on the eve of the pandemic.
Unemployment is still low by historical standards at 3.8pc, though that has edged up from the first quarter’s trough of 3.7pc.
The inactivity rate, which measures the share of working-age adults who are neither in work nor looking for work, is 21.4pc, up from 20.2pc before Covid.
Those working full-time are spending slightly less time toiling now than they did in the three months to February 2020. Back before working from home took hold, the average full-timer spent 36.9 hours at work per week. Now that is down at 36.4 hours. However, part-timers are putting in an extra 20 minutes each week.
ONS: Still a vacancy for every person unemployed
Here's more from Darren Morgan at the ONS. He told BBC Radio 4 Today that there's still uncertainty over how vacancies will change in the coming months.
There has been a lot of talk about whether vacancies have peaked and they did fall by a little bit in the latest three months. But the important thing to flag is that they still remain at historically high levels.
There are nearly half a million more vacancies now than there were before the pandemic. And there still remains a vacancy for every person unemployed. It is astonishing isn't it. That has only happened for the first time in recent months.
I think what people will be looking at now that it looks as though vacancies have perhaps started to fall, we will wait and see. Wil the number of vacancies continue to fall? And then is that because businesses are finding people to join them, and that's good news.
Or is it because businesses are withdrawing their vacancies because of uncertainty? Probably that is one of the easiest levers businesses have in the labour market if they are starting to face uncertainty and challenges in their business.
ONS: Real value of pay keeps falling
Darren Morgan at the ONS said:
The number of people in work grew in the second quarter of 2022, whilst the headline rates of unemployment and of people neither working nor looking for a job were little changed.
Meanwhile, the total number of hours worked each week appears to have stabilised very slightly below pre-pandemic levels.
Redundancies are still at very low levels. However, although the number of job vacancies remains historically very high, it fell for the first time since the summer of 2020.
The real value of pay continues to fall. Excluding bonuses, it is still dropping faster than at any time since comparable records began in 2001.
Headline indicators for the UK labour market for April to June 2022 show that
▪️ employment was 75.5%
▪️ unemployment was 3.8%
▪️ economic inactivity was 21.4%
➡️ https://t.co/NCz8Ddywix pic.twitter.com/3F3O5XhFnh
— Office for National Statistics (ONS) (@ONS) August 16, 2022
Job vacancies fall for first time in two years
UK job vacancies have fallen for the first time since August 2020, in a further sign that cost-of-living crisis could push Britain into a recession.
The number of open jobs among employers fell by 19,800 to 1.27m in the latest quarter, according to the ONS. While that's still very high by historical standards, it's the first decline in two years.
Meanwhile, the number of people in employment rose by 160,000. That's a 46pc fall in job creation from the previous quarter.
In a further sign of the squeeze on household budgets, real pay tumbled 3pc when adjusted for inflation – the biggest drop since records began in 2001.
5 things to start your day
1) Rough gas storage site cleared to start filling up within weeks: The move will allow the facility to start filling up for the winter within weeks
2) Private equity swoops for cybersecurity company Darktrace: Chicago-based Thoma Bravohe has entered into early negotiations with the UK tech firm
3) Ousted WeWork founder raises $350m for ‘seismic shift’ in home rental: Adam Neumann secured the cash for new business Flow from Silicon Valley investor Andreessen Horowitz
4) Coal miner dubbed ‘worthless’ in net zero world reports 3,000pc increase in profits: Demand for the polluting fossil fuel has soared since Russia’s invasion of Ukraine
5) Elon Musk writes for China’s censors and welcomes more ‘like-minded Chinese partners’: The billionaire believes Chinese companies ‘will be a force to be reckoned with’
What happened overnight
Asian markets struggled for direction this morning, weighed by worries over global growth following weak China data that knocked oil prices and commodity-linked currencies.
The dollar held near a one-week high as investors piled back into the safe-haven currency, while the Australian dollar, Euro and Chinese yuan buckled.
MSCI's broadest index of Asia-Pacific shares outside Japan ticked up 0.2pc, recovering from Monday's losses. MSCI's benchmark index has gained 5pc from the year's lows but is still down 15pc so far this year.
Coming up today
Corporate: Castings (full-year results); Genuit (interim results); Watches of Switzerland (trading statement)
Economics: Jobs market (UK); ZEW surveys (Germany); housing starts (US)