18 July 2025: The hospitality industry is being decimated

Unemployment rose for the fifth consecutive month, according to figures that were published yesterday. Wage growth is slowing, which is better news for the Bank of England, which is under pressure to cut interest rates despite inflation continuing to rise.

Payrolls decreased by 41,000 (0.1%) in June 2025, taking employment down by 178,000 (0.6%) since June 2024, according to estimates from the Office for National Statistics.

However, the UK statistical office noted that the June 2025 figure should be treated as a provisional estimate and is likely to be revised when more data is received next month. The labour market continues to weaken, with the number of employees on payroll falling again. However, revised tax data shows the decline in recent months is less pronounced than previously estimated.

In the UK, the estimated number of vacancies fell for the 36th consecutive period compared with the previous three months, dropping by 56,000 to 727,000 in April to June 2025.

Wage growth from March to May 2025 hit 5% for average earnings excluding bonuses, down slightly from the three months to April when that figure stood at 5.3%. While the data paints a picture of a weakening jobs market, the figures are an improvement over May. However, the figures are worse than the market had expected.

Given the lack of economic growth, which comes on the heels of worrying inflation data, it must raise the spectre of stagflation in the UK again. The Bank of England is between a rock and a hard place ahead of their decision on rates coming up in August.

Restaurants and pubs have suffered “devastating” job losses after Rachel Reeves’s tax raid on businesses, bosses have said. The hospitality industry has lost more than 108,000 payroll jobs over the last year, according to official figures, with retail and wholesale down more than 65,500.

Industry body UK Hospitality said the sector has lost 84,000 jobs since last year’s Budget, when the Chancellor hiked National Insurance contributions and the minimum wage. The sector’s total job losses since the Budget have risen by 13,000 jobs in a month, the organisation said, which accounts for nearly half, 45%, of all job losses.

The Chancellor has lost the trust of the electorate, with her approval rating plummeting to just 12%, although according to YouGov, well over 90% of the public know who the UK Chancellor is! Who said any publicity is good publicity?

Trust once lost is incredibly difficult to regain, probably more so in politics than in almost any other walk of life.

She will probably remain in post at least until she has delivered her Autumn Budget, but she is odds-on to be the next minister to leave the Cabinet.

The pound lost ground yesterday as the market faced up to the looming prospect of a bout of stagflation before the end of the year. It fell to a low of 1.3374 before rallying to close almost unchanged at 1.3415.

A study of Donald Trump’s second term in office, when looked at through the lens of his first, shows that he rarely makes a definitive decision, often leaving himself a “get out” should he decide that whatever he has decided is not working.

A case in point is the mess that is his trade policy. He has flip-flopped so many times that even the nations that are subject to tariffs are no longer clear what they are expected to pay.

Furthermore, he has changed the focus of tariffs from “punishing” those nations who have “taken advantage” of U.S. “generosity” over the years to a weapon to try to bend rivals to his will.

Trump is facing renewed internal criticism over his relationship with Jeffrey Epstein. He asked Attorney General Pam Bondi to release “pertinent” files on the criminal investigation of the late convicted sex offender Jeffrey Epstein, “subject to court approval.”

It is unusual for Trump to face such severe scrutiny, since he appears to have no way of denying his relationship with Epstein.

It’s often hard to know when President Trump is serious about something or merely creating a distraction. But should he mean it this week when he told Republican lawmakers he may fire Federal Reserve Chair Jerome Powell, he should take the market’s advice: Don’t do it.

Trump reportedly told some Republicans he’s written a letter firing Mr. Powell and may send it. Markets reacted badly, and within minutes, the President said he has no plans to dismiss the Fed chief (yet). Some advisers are telling Mr. Trump to keep Mr. Powell until his term as chairman expires next May, but others are gunning for the Fed leader. Mr. Trump might not know himself what he’ll do.

Mr. Trump’s grievances with Mr. Powell are easy to understand, if not always to agree with.

The President expected Mr. Powell to be more deferential when he appointed the chairman in his first term. Instead, Mr. Powell continued the Fed’s policy at the time of gradually increasing interest rates and shrinking the central bank’s balance sheet. Mr. Trump apparently didn’t notice the economy boomed amid moderate inflation, as Mr. Powell’s monetary normalisation coincided with the first-term tax reform.

More recently, Mr. Powell has made what have turned out to be policy and political missteps. He is paid to make decisions on monetary policy, and it is only those with 20:20 hindsight who don’t get things wrong occasionally.

He admits he was too slow to recognise the accelerating inflation of 2021-2. Trump is right to call him “too late” for that. He then delivered interest-rate cuts starting in September 2024 despite mixed data arguing for reductions. Many Republicans perceive this as an attempt to boost Kamala Harris’s presidential prospects. It’s doubtful that’s what Mr. Powell intended, but appearances matter in politics.

Although Powell is a “card-carrying” member of the Republican Party, he avoids any suggestion that his decisions are politically motivated.

The Federal Reserve should not cut interest rates "for some time" as the impact of Trump administration tariffs begins passing through to consumer prices, with tight monetary policy needed to keep inflationary psychology in check, Federal Reserve Governor Adriana Kugler said yesterday.

The dollar is maintaining its relative recovery from the initial chaos caused by Trump’s trade policy. It reversed its losses from the previous day, reaching a high of 98.93 and closing at 98.63.

ECB President Christine Lagarde believes that the current relative strength of the Euro reflects the Eurozone’s economic strength.

While it is true that the euro has grown in strength against other G7 Currencies, its strength has a lot more to do with the size of the Eurozone economy than with its strength.

Sterling, the CHF, and, despite renewed recent weakness, the JPY have all gained ground to a greater or lesser extent versus the dollar since Trump’s April speech on tariffs.

She, in effect, claims that Eurozone citizens have “never had it so good”, conveniently avoiding the facts, which are as follows:

The strength of the currency is more due to dollar weakness than Euro strength, and any increase in exports to the U.S. despite the threat of tariffs is due to the front loading of export orders, and optimism over Germany’s creating of a Eur 150billion infrastructure fund, the results of which won't hit the economy until late next year at the earliest.

The ECB is continuing to rise its luck, as currency strength has made a significant contribution to the fall in inflation. It is almost unheard of for a Central Bank to cut interest rates by 200 basis points and still see inflation fall to its current level.

The latest inflation data showed that core inflation remained at 2% in June. While that is a positive result, the ECB continues to pay little attention to the other leg of its two-legged mandate. It appears that European Commission President Ursula von der Leyen is content to keep her head firmly in the sand by continuing to avoid any talk of a trade deal with the U.S., even as time ticks down to Donald Trump’s deadline to avoid a blanket 30% tariff on all EU exports.

Lagarde may well be on her final lap as ECB President, but she still has words of support for Jerome Powell and the independence of Central Banks.

At a recent conference, Lagarde described Jerome H. Powell, the chair of the Federal Reserve, as “the standard of the courageous central banker.”

The room was filled with central bank officials from around the world, who stood to applaud in a public outburst of support for a fellow central banker under relentless assault by President Trump.

Central Banks’ independence, which allows policymakers to set interest rates free from political interference, is considered sacrosanct by investors and economists. That’s why the attacks on the Fed, the most important and influential central bank in the world, have reverberated far beyond Washington.

“It’s a signal which is worrisome,” said Stefan Ingves, the former governor of the Riksbank, Sweden’s Central Bank at the time.

The euro is beginning to mark time as the European holiday season begins. It may be six weeks before there is more clarity about the currency’s direction, although there is a series of Central Bank meetings taking place before mid-August.

The common currency fell to a low of 1.1559 yesterday, briefly challenging its short-term level of resistance before recovering to close at 1.1596.

Have a great day!