13 August 2025: Rising job losses and cooling wage growth pose a challenge

Britain’s jobs market is in a challenging position. Job losses are rising, fewer employers are advertising for staff, and the resurgence of inflation is eroding the value of workers’ pay.

The latest figures showing a decline in the number of employees on company payrolls in July, alongside a slowdown in annual wage growth in the three months to June, underscore the challenge facing the chancellor.

Rebooting the economy was the number one priority of this Government when it came to power over a year ago, but by almost every metric, things have slid further. The official headline unemployment rate remained stuck at 4.7% in the three months to June, above the 4.2% level Reeves inherited a year ago, at the highest rate since 2021.

Market analysts view two particular Reeves innovations as the most significant actions she has taken that have led to our current position: the increase in employers’ National Insurance contributions and a weakening economic outlook.

Yesterday’s figures showed job losses have been concentrated most in the retail and hospitality sectors, which, as heavier users of part-time and flexible contracts, lower pay and seasonal work, are among the most exposed to the rising costs of employment. This has been a growing issue for as long as Reeves has been in office, but she simply treats workers who have lost their jobs as “collateral damage”.

Hiring intentions have fallen to record lows as uncertainty about when the situation will improve grips the economy.

The Bank of England had to react by cutting rates last week, as it has a mandate to respond to the fiscal situation as it presents itself.

Andrew Bailey told CNBC, there hasn’t been a “falling out” with the U.K. government regarding the economy or Reeves’s determination to liberalise the fintech market and bring it into mainstream banking.

“There’s been no falling out between [Reeves] and me on this, or indeed on anything,” he said. “Actually, we have very good relations, and I think both the Bank and the Treasury have made that clear,” Bailey commented.

The pound advanced significantly yesterday, retesting the 1.3530 zone, or three-week highs, as negative pressure continues to weaken the Greenback. In the meantime, traders are still looking at the latest US CPI data. It closed at 1.3500.

U.S. President Donald Trump hit out at Goldman Sachs CEO David Solomon yesterday, saying the bank had been wrong to predict U.S. tariffs would hurt the economy and questioned whether Solomon should lead the Wall Street institution.

The bank CEO is the latest corporate boss to become the target of Trump's ire, and the situation shows the sensitivity corporations face about tariffs. Goldman is the latest Wall Street bank to face pressure, after Trump criticised JPMorgan Chase and Bank of America over alleged debanking, or refusing to provide banking services to individuals.

While Trump did not specify which Goldman research he was referring to, the Wall Street bank, like many of its peers, has taken a bearish stance on Trump's tariffs.

In a note published on Sunday, Goldman Sachs analysts, led by chief economist Jan Hatzius, said U.S. consumers had absorbed 22% of tariff costs through June and that figure could rise to 67% if recent tariffs continue on the same trajectory.

"I think that David should go out and get himself a new economist," Trump wrote.

President Trump has a “very open mind” about who should replace Federal Reserve Chairman Jerome Powell; he’s even considered Janet Yellen for the post, Treasury Secretary Scott Bessent revealed.

Powell’s term as chairman of the US central bank expires in May 2026, and the Trump administration, already interviewing potential replacements, is casting a “very wide net” in the search for his replacement, the Treasury secretary told Fox Business.“The President has a very open mind,” Bessent said, when asked who Trump is eyeing to replace Powell.

“He even considered re-appointing Janet Yellen, so we want to see what everyone’s thinking,” he added.

American households and investors cheered the latest Consumer Price Index report showing tame inflation that could move the Federal Reserve to cut interest rates in September.

However, some cautioned that tariff-driven inflation may yet emerge more forcefully in the coming months from the nation’s supply chain as businesses run down inventories and pass on costs to consumers.

Aggressive shopping by consumers may mute the impact of tariffs on inflation but could also lead to a cycle of falling demand and rising unemployment, Richmond Fed president Tom Barkin said yesterday, while adding he is hopeful a sharp rise in the jobless rate will be avoided because household spending has held up well so far.

The Fed should not take the tariffs' muted effect on inflation so far as an opportunity to cut interest rates, but rather as a sign that monetary policy is "appropriately calibrated," Kansas City Federal Reserve President Jeffrey Schmid said on Tuesday, in remarks that contrast with the increasingly dovish tone of some of his colleagues.

"With the economy still showing momentum, growing business optimism, and inflation still stuck above our objective, retaining a modestly restrictive monetary policy stance remains appropriate for the time being," Schmid said. "While increased tariffs seem to be having a limited effect on inflation, I view this as a rationale for keeping policy on hold rather than an opportunity to ease the stance of policy."

The dollar index slipped back yesterday as it struggles for momentum. It fell to a low of 97.90 and closed at 98.06, as it appears to traders to be too high to buy and too low to sell.

One of the most significant ambitions of the creation of the Eurozone is to, at some point, supplant the dollar as the world's reserve currency. In its still nascent development, the common currency of the European Union has had several serious, almost terminal issues, which show how far there is to go before that goal can be even remotely considered.

The current situation in Germany, which has had a fairly spectacular fall from grace, highlights the issues the region still has and will continue to have until it abandons its reliance on twenty individual economies and becomes one.

It is hard to imagine the U.S. economy being driven by the issues faced by Texas or California, even though California has the sixth-largest economy in the world.

Germany's economy, long the engine of the Eurozone, has entered a precarious phase.

After a seven-quarter recession ending in Q2 2025 with a modest 0.4% quarterly GDP growth, the country faces structural headwinds: energy-intensive industries like chemicals and automotive are grappling with high costs, while transatlantic trade tensions have sapped confidence.

The EU-US trade deal, finalised in July, with a 15% baseline tariff on EU goods, with steeper levies on steel and aluminium, has further deepened the sense of disillusionment. For investors, the question is no longer whether to reallocate assets, but how to navigate a landscape where geopolitical alignment and sectoral resilience dictate returns.

As the tariff on EU goods exports to the U.S. went into effect on Thursday, heads turned toward the wine and spirits sector in France, which represents billions in exports to the U.S., often by small, family-run businesses.

Experts agree the tariffs, part of the latest salvo in Trump’s global trade war, will strike a blow to this economy. But some are choosing to see the glass half full as tariffs on other goods and regions continue to multiply around the world.

Laurent Bunan, a third-generation winemaker at the Domaines Bunan vineyard in Provence, exports a significant part of his product to the U.S. He told reporters that tariffs are particularly worrisome because they coincide with a slowly strengthening dollar, so price increases will be closer to 23-25%.

“I'm not afraid because we're going to defend ourselves; we make quality wines, we make good products,” Bunan said. “Americans are big consumers who love European products, who love France, and who love the good wine we know how to make.”

Trump has commented many times that the wines produced in California and some up-and-coming new areas match up with the best that France can offer.

The euro is stuck in a 1.1580/1.1700 range currently and is seeing both sides threatened. This is likely to remain for the next two weeks until the market returns to full capacity following the summer lull. The single currency reached a high of 1.1693 yesterday and closed at 1.1674.

Have a great day!