The number of Brits on payrolls surged by 356,000 in June as the economy reopened and hospitality boomed

UK economy reopens
The UK economy is gradually reopening from coronavirus lockdowns.

  • The number of Brits on payrolls surged by 356,000 in June as the economy bounced back from COVID-19.
  • Britain’s economy is gradually reopening, causing the hospitality sector to increase hiring rapidly.
  • However, the unemployment rate ticked up to 4.8% in the three months to May, data showed.
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The number of Brits finding work surged in June as the economy rebounded from COVID-19 lockdowns, with 356,000 added to UK company payrolls compared to May.

It was the biggest increase in payrolls since the start of the pandemic, figures released Thursday by the Office for National Statistics showed.

“The labor market is continuing to recover, with the number of employees on payroll up again strongly in June,” said Darren Morgan, director of economic statistics at the ONS.

“The number of job vacancies continued to rise very strongly. The biggest sector driving this was hospitality, followed by wholesaling and retailing.”

Separate data showed the unemployment rate ticked up to 4.8% in the three months to May, up from 4.7% in the three months to April. It was down from 5% in the previous quarter, however.

Read more: UBS details 2 investing strategies designed to profit from an economy-driven bull market – and lays out why stocks still have further to run

Average pay rose 7.3% in the three months to May compared to a year earlier, up sharply from a 5.7% increase in the three months to April. However, the ONS said pay looked strong due to the comparison with a weak period a year earlier.

The UK economy has gradually reopened from coronavirus lockdowns, with the government loosening restrictions in steps. In May, indoor hospitality at places like pubs and cinemas was allowed to resume, underpinning the economy.

June’s payroll figures were boosted by an increase of 94,000 in accommodation and food jobs, the ONS said.

England’s government is set to end almost all restrictions on July 19, despite soaring cases of the delta COVID-19 variant. Northern Ireland, Scotland and Wales are being somewhat more cautious, although have still loosened lockdowns.

The pound was roughly flat against the dollar after the data was released, at $1.386. FTSE 100 futures were down 0.4%.

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If you’re making minimum wage, inflation means your dollar is the weakest it’s been in more than a decade

McDonald's fight for $15 wage
An employee of McDonald’s protests outside a branch restaurant for a raise in their minimum wage to $15 an hour, in Fort Lauderdale on May 19, 2021.

  • Wages are rising at their fastest rate since the 1980s, but it’s not enough to keep up with inflation.
  • The real federal minimum wage sits at the lowest since 2008 and is nearing multi-decade lows.
  • While Americans are earning more as businesses lift pay, soaring prices are leaving their dollars weaker.
  • See more stories on Insider’s business page.

For Americans earning the minimum wage, surging inflation is making their dollar the weakest it’s been in more than a decade.

On the surface, the labor market seems to finally be benefitting low-income workers. Wage growth surged to the fastest pace since the 1980s through April and May. Businesses are increasingly using signing bonuses and other incentives to attract workers. And quits soared to a record high in April, suggesting Americans are confident in their chances at finding a better job.

But that encouraging trend is reversed – and then some – by booming inflation seen through reopening. Price growth has accelerated to its fastest one-year pace since 2008 as a wave of pent-up demand runs up against widespread shortages and production bottlenecks. After accounting for the broad upswing in consumer prices, the minimum wage is the weakest it’s been since 2008.

The rate of decline has also accelerated through spring, suggesting the real minimum wage could soon breach multi-decade lows.

To be sure, economists largely expect inflation to cool as the country settles into a new normal and bottlenecks are resolved. President Joe Biden backed the outlook again on Thursday, saying he expects price growth to “pop up a little bit and then come back down.”

The size of that pop remains up for debate, and Federal Reserve officials are bracing for a larger upswing than previously expected. Members of the Federal Open Market Committee expect inflation to average 3.4% this year before falling to 2.1% in 2022, according to median projections published June 16. That compares to the March forecast of 2.4% inflation in 2021.

The faster rate of inflation and tumbling real wage could put new pressure on lawmakers and businesses to raise wages, Morgan Stanley economists said Monday. Despite average earnings soaring in recent months, 79% of industries are still seeing inflation outpace wage growth. And those who are benefitting most are middle- and high-income Americans, according to the bank.

The trend could intensify the push for higher wages, particularly for those at the bottom of the pay scale, the team led by Ellen Zentner said.

“While hard to know exactly how these political forces impact wage growth in the short term, we suspect this is a longer-term tailwind toward rising and broadening wage growth,” they added.

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One chart shows the 10 industries poised to pay you a higher salary soon, and the 10 that probably won’t, according to Morgan Stanley

Hotel bellboy coronavirus
A bellman waits for residents at the Plaza Residences on Central Park South on April 02, 2020 in New York City

  • The labor shortage is uneven, leaving some industries more likely to raise wages than others.
  • The hotel, restaurants, and leisure sector is most likely to raise pay, Morgan Stanley said Monday.
  • Independent power and renewable electricity businesses are the least likely to hike wages, the bank added.
  • See more stories on Insider’s business page.

Like many aspects of the US recovery, the labor shortage is uneven.

Where some industries were able to quickly shift to telework and retain most employees through the pandemic, others are struggling to rehire. Job openings sit at a record-high 9.3 million, but hiring lagged economist forecasts for two months straight while quits reached all-time highs.

Several businesses have already raised wages in a bid to attract more workers than the competition. Yet certain sectors are still likely to see additional pay hikes as the shortage lingers, Morgan Stanley economists led by Ellen Zentner said in a Monday note.

“Wage pressures to-date have been relatively narrow, but our leading indicators point to labor market tightness in an increasing number of industries, raising the prospect of further wage increases and broadening out of wage pressures,” the team said.

Wage Pressures MS
Chart via Morgan Stanley.

Hotels, restaurants, and leisure businesses came out on top, with real estate management and development following close behind. Commercial services and supplies businesses touted the third-highest wage-risk score. Morgan Stanley homed in on which sectors are most likely to raise wages first by analyzing companies’ earnings-per-employee, estimated margins, and historic wage growth.

The sectors at the greatest risk of wage hikes shared a handful of characteristics. Many were among those hit hardest by the pandemic and related lockdowns. The top 10 sectors mostly consisted of service jobs, likely due to the mass layoffs seen in 2020. Retail businesses also face higher wage risk as consumer demand booms and businesses struggle with supply bottlenecks.

On the other end of the spectrum, producers make up most of the sectors with the softest wage risk. Independent power and renewable electricity businesses sit at the bottom of the list, followed by the oil gas and consumable fuel sector. Water utilities, tobacco, and telecom services businesses were all nearly tied for having the third-lowest wage risk.

Morgan Stanley also expects a larger share of sectors to drive wages higher. While 64% of industries saw above-trend pay growth since March, that share grew to 93% in April and reached 79% in May. A deeper look at industry-specific data shows wage pressures growing in middle- and high-wage industries, marking a departure from trends seen just before the pandemic, the team said.

Still, the elevated rate of wage growth might not be felt in the near term. Most industries’ pay hikes have been dwarfed by stronger inflation through spring. Only 21% of sectors saw pay climb faster than the Consumer Price Index in the three months through May, Morgan Stanley said. For workers to actually benefit from the faster-than-average pay growth, businesses will need to keep raising wages after the anticipated cooling of inflation.

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