It’s a Good Job
The one area of the economy that continues to spring a pleasant surprise and offer hope for the immediate future is employment. The latest figures are no exception.
The Office for National Statistics (ONS) reported this week that the number of people out of work fell by 82,000 between August and October to 2.51 million, the biggest quarterly fall since 2001. The unemployment rate was 7.8%, down 0.2 percentage points from the previous three months.
Often the various calculations of the jobs market offer conflicting evidence but this time they all seem to point in the same direction. Employment rose 40,000 to 29.6 million, which was the highest figure since records began in 1971.
It is easy to moan that the Olympic Games boosted employment temporarily, and no doubt that is true, but you would have expected the effect to have worn off by September, and certainly by October. Yet early indications are that people are still finding work, for the number claiming Jobseekers’ Allowance fell in November.
The gloss was taken off figures earlier this year by the fact that much new employment was part-time. The latest statistics show part-time work static while the gains have come in full-time work.
Total pay is up 1.8% on a year ago, reflecting the continuing squeeze on households as pay fails to keep up with inflation. Even here, though, there is some comfort, for it is clear that rising wages are not fuelling more inflation, which would ultimately heap far more misery on those who are struggling.
It is quite possible, likely even, that the employment figures for the rest of the year will not be so good. But there is also good reason to hope for further modest improvement rather than an actual setback. I feel that we can reasonably count on economic growth holding steady or even improving a fraction in the fourth quarter.
The FTSE 100 index has been edging higher and the best chance to get in before year-end has probably gone. I would not want to chase the market much higher, certainly not above 6,000 points at this stage, given the continuing considerable uncertainties at home, in Europe and in the US. However, I remain fully invested.
A Choker from Greggs
The unexpected decision of Ken McMeikan to quit as chief executive of bakery chain Greggs (GRG) as soon as a successor can be found is seriously bad news. I fear there are unfortunate echoes of what happened at Tesco when a highly successful chief executive, Sir Terry Leahy, packed up just as the clouds over the company were beginning to darken.
One person does not make a company, but the top guy comes pretty close
One person does not make a company, but the top guy comes pretty close. I have a great admiration for McMeikan, who has improved the shops and widened the range of food with considerable success. He won Greggs an enormous amount of free favourable publicity in opposing the pasty tax in the last Budget.
However, Greggs has been under pressure for some months as the rising cost of inputs, including foodstuff and energy, continue while consumers are short of cash, making it difficult to pass on price rises. That situation is likely to get worse rather than better following poor harvests this year, a new round of energy price rises and looming increases in business rates.
The shares have already fallen back some way from a peak of 567p in March, when a four-year run from 330p petered out. I feel no temptation to buy in after a fall to well below 500p and if I held the shares I would consider selling on any rally. It may be best to get out now anyway.
Ho, Hum
Despite my admittedly muted enthusiasm for UK stocks, it often seems easier to pick companies to avoid. The successes go along their humdrum way while the disasters scream out.
One continuing disaster is entertainment retailer HMV (HMV), where sales are down heavily and another loss has been recorded in the 26 weeks to 27 October. The new chief executive and finance director have got their work cut out.
Two factors worry me in particular. Firstly, suppliers have provided £40 million of funding to see HMV through the crucial Christmas period. It looks like a rather desperate act.
Secondly, the business update (with commendable frankness) says that trading conditions have created ‘material uncertainties’ and HMV will probably be in breach of its banking covenants by the end of January.
Talks are being held with the banks, and although these talks are constructive it is seriously bad news that they are needed at all. Stay well clear.
Market Performance: December 10 - 14
FTSE 100 Index: +0.12%
FTSE 250 Index: +0.47%
FTSE All Share: +0.19%
FTSE Small Cap: +1.07%
FTSE AIM 100: +0.18%
FTSE Fledgling: +1.46%
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Rodney Hobson is a long-term investor commenting on his own ideas and portfolio; his comments are for informational purposes only and should not be construed as investment advice.
