It’ll take two years for the UK to overcome the labour shortages that we’re currently experiencing, according to the CBI. The lack of workers is a broad-based problem that’s hitting sectors from construction to hospitality and having knock-on effects of goods shortages, higher prices and businesses having to limit their operating capacity despite having demand for more. The cause of the problem is being cited as a perfect storm of Covid and Brexit, with illness and self-isolation causing a rolling issue of short-term problems whilst the lack of free movement of people means that the usual market forces of supply and demand can’t be fulfilled with a migrant workforce coming in to fill the gaps. The CBI has blasted the government’s policy of using British workers by saying that this doesn’t present an immediate solution when you must train people to undertake skilled jobs and that “inflexibility now just brings economic damage”. The furlough scheme runs out at the end of this month and currently 1.5 million people are still on the scheme. This seems like at the point of expiry would mean that there are naturally going to be more people available to be employed, but the forecasts are that this isn’t going to have an immediate impact, again because of the lead times for training. The call is to add more jobs to the shortage occupations list with temporary visas for overseas employees until British workers can be suitably trained.

Boris is back in the office today and is going to have a busy time of it: He’ll be making a statement to the Commons over the government’s handling of Afghanistan and their plans to bring more refugees to settle in the UK. That might actually be the easier conversation for him to have, as there are plans afoot for a rise in National insurance to fund health and social care expenditure. Boris is looking at an extra £10bn a year to the NHS to start to get through the backlog of treatments and an overhaul to social care that would mean a cap to individual costs and therefore a greater burden on the taxpayer. An increase in NI to cover this is being met with a pretty broad backlash because pensioners don’t pay National Insurance and therefore it’s being seen that the young are subsidising the old. Still, pensioners won’t be getting it all their own way as we could see the end to the ‘triple lock’ this week too: The artificial increase in wages because of the furlough scheme would mean pensions increasing by more than 7% this year under the triple lock, but this would cost the government >£5bn and understandably they don’t think that’s right. We’ll also expect to see announcements over vaccine passports becoming mandatory at large venues or events, which is another bone of contention for many. Boris does have one trick up his sleeve though and that is the threat of a cabinet reshuffle! He’s more likely to get his way with the carrot of a position in cabinet or the stick of losing a spot (though Dominic Raab is probably beyond salvation).
If employment numbers are anything to go by, the recovery there is grinding to a halt. The non-farm payrolls numbers for August came in at just 235,000 versus a market expectation of 700k, as jobs growth in restaurants and hospitality slowed, with the increase in covid rates keeping more people at home. Interestingly the numbers also showed a decline in retail jobs, which is speaking to the general slowdown in consumer demand. The US had been boosted massively by stimulus cheques being posted to most households at the start of the year, but with those now largely spent and the other payroll support benefits drawing to a close, this could prove to be a more significant problem for their recovery.
Looking Ahead
The payrolls news might be enough to slow the Federal Reserve’s efforts to normalise monetary policy, at least for a few months, and we now think it’s less likely that this month’s FOMC meeting will see much in the way of change. We’ve got plenty going on between now and the beginning of the month though and the usual slew of data that starts the month is very much underway this week. Today is Labour day in the US, which signifies the end of summer, in Europe though things are pretty much back to normal and people getting back at their desks – with many moving from home offices back to the main offices for the first time since the pandemic began (we’ll get a report on the volume of traffic on tubes a little later on!). We’re gong to be looking at construction PMI’s for the UK and Germany today – both of which should be strong reads, but we might start to see the labour shortages and materials price rises start to take hold and that could soften the numbers slightly. The big one for us this week is the ECB meeting on Thursday, which isn’t likely to result in policy changes, but could set the tone for central banks to dial back on any remnants of hawkishness in light of increasing case loads.
HCFX London to Paris
In a bid to boost international relations and test the effectiveness of post Brexit border operations, two of the HCFX team will be cycling from London to Paris later this week. As well the international relations piece, we’re also riding to raise funds for Cure Leukaemia – an amazing charity where the clue to their mission is in the title, literally!


Have a great week


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