Real wages falling at fastest rate on record

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20th July 2022

Bite-sized business news from the UK and beyond

Good morning Overnight Netflix reported it had lost 1m subscribers in the last quarter better than the 2m drop it forecast back in April when it surprised investors with its first quarterly decline, of 200,000, in 11 years.

The streaming giant also announced it was launching a new cheaper service that would be supported by adverts and through new multi-household contracts.

Today's stories

Real wages falling at fastest rate on record
Cost of living bites into retailer profits

ECONOMY
Real wages falling at fastest rate on record

What happened?
Average pay when adjusted for inflation was down 2.8% between March and May, according to the latest official data from the ONS released yesterday. That’s the biggest drop since records began in 2001.

Like the weather the UK labour market is running hot
The employment rate increased by 0.4% to 75.9% with the number of full-time employees rising to a record high.

The number of job vacancies in June 2022 rose to 1.3m, another record. However, the rate of growth in vacancies has started to slow down.

But this isn’t translating into better real pay for workers. Wages aren’t keeping up with inflation which is at 9.1% a 40-year-high.

The situation is worse for the public sector
ONS figures showed that private sector pay, before adjusting for inflation, is rising at 7.2% - five times quicker than the public sector.

It came the same day as the government announced a 5% average wage rise for 2.5m public workers including teachers, doctors and police officers. But unions representing the sector were disappointed by the below inflation increase and raised the threat of strikes to get a better deal.

The Bank of England has warned against pay increases in line with inflation
The central bank is worried that the cost to employers of higher wages will be passed on to consumers in the price of goods and services. Which then feeds inflation further and ultimately more wage rises a so-called ‘wage-price’ spiral that could lead to uncontrollable levels of inflation.

Other stories to keep you in the loop

Half-point interest rate rise ‘on the table’ next month, says Bank of England chief
Martin Lewis warns next prime minister of ‘financial cataclysm’
Postal strike looms as Royal Mail workers back walkouts in pay and jobs row
Apple sued for monopoly on the iPhone’s tap-to-pay
Twitter-Musk takeover dispute heading for October trial
Ocado boss quits after ‘extremely challenging’ tenure
UK ticket holder wins biggest ever EuroMillions jackpot of £190m

RETAIL
Cost of living bites into retailer profits

What happened?
Yesterday furniture retailer Made.com and chocolatier Hotel Chocolat issued profit warnings citing that the rising cost of living is hurting consumer demand for their goods.

Shares in Made plummeted by 46% after it cut its revenue and profit targets for the third time in 2022. The company, known for its sleek Millennial-appealing design, said that sales in the first half of the year dropped 19%. With household budgets squeezed by soaring energy and food costs, demand for non-essential items like high-end designer furniture is falling.

Made is also dealing with rising costs from ongoing supply issues including disruptions at ports and higher freight costs.

Hotel Chocolat reported a 35% jump in UK sales grew 35% in the 12 months to June but warned that it expects to make a loss this year as it focuses on its domestic market and anticipates lower consumer demand.

The luxury chocolate retailer said it would close its US stores and only trade online in the country. The company also plans to step down investment in its Japanese joint venture.

Hotel Chocolat expects sales growth to slow this year as consumers cut back on upmarket confectionery in the face of the rising cost of living.

Stat of the day

Yesterday the UK recorded its highest ever temperature at 40.3°C in Lincolnshire

Interesting links from around the web

How to make sense of the very weird job market
World's 50 greatest places of 2022, according to Time magazine
How science is making chocolate taste even better

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Real wages falling at fastest rate on record

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