Bloomberg Audio Studios, Podcasts, Radio News. Welcome to the Marin Dogs Money Market Wrap, where we talk about the biggest moves in the markets this week and what is driving them. I'm Marin Sum's Web editor at Large for Bloomberg UK Wealth, and.
I'm Joined Stairpek, Senior report and author of the Money Distilled News.
Later, welcome back from more of your lovely holidays.
John, thank you they were excellent.
Well, I'm very glad to hear it, right John, Listen, I know we want to talk about we want to talk about interest raise, we want to wet the fair, we want to talk about the UK etc. But before we do anything, I want to bring you with me to look at the half year report from next which is always really well written, always really interesting, and always focuses on stuff that everyone should be focusing on.
And so there's everyone.
I'm going to put the link in the show notes, go to page twenty two and start reading, because this is a bit where they look outside the performance of the company to look at wider trends in the economy, and they're looking at something you and I have talked about a lot, John, Where are the job vacancies?
Going is AI affecting things? What is happening?
So there's a chart, I'll pop it on Twitter for you shows how the continued for in UK vacancies is beginning to be reflected in the actual number of employed people, and those trends are echoed in NeXT's own data. They tell the same story. So vacancies at their stores are down thirty five percent, down thirty five percent more in some stores, and applications for jobs at Next have gone up by seventy six percent. So applications per vacancy to work at Next are two zero point seven times higher
than they were two years ago. That's really something. Those are big numbers. And then you look keep going down. I'm telling it page twenty three now, listeners, page twenty three, because you want you to go and look at this yourself. He then looks at it in terms of inflation, a decade of above inflation increases in the employment costs of entry level work at or around the national living wage, something that's been compounded by the recent increase in employees'
national insurance increases. So if you look at the chart, you can see that since twenty fifteen, inflation has gone up thirty eight percent, the national living wage has gone up eighty eight percent, and the cost of part time employment by having someone work for sixteen hours a week has gone up one hundred and two percent.
I'm not surprised by those figures, but it's extraordinary whenever you put it like that. Yeah, and you can also sell so I guess I know he does mention the AI, but it's pretty clear what the actual driver it is.
Yeah, And what he says then is is that mechanization will be driven by this. So the increasing costs is likely to have accelerated the rate at which businesses have mechanized. The effect of automating some work is married and likely amplified by the potential for AI to improve the efficiency
of many desk work activities. So you may say, and this is another a conversation that you and I've had a lot over the years, that if you make labor more expensive, in some ways this isn't a bad thing, because it means that there will be a huge rise in productivity. So we'll have mechanization. AI will take over those boring, lowly played clerical clerical jobs, and that is in some ways a good thing. Will have a more productive economy, except for if those people don't go on
to be employed elsewhere. The fact that some people are more productive doesn't help the people who don't have a job at all.
Well, no, and also you know, obviously there's a knock on impact on the benefits bill as well, which because part of the problem with this is, I mean a lot of this messing about with the minimum wage was the offset the issues raised about people being in work and still haven't any get tax credits, which all goes back to Gordon Brown's kind of entire revamp into the
UK economy for the worst. But the problem is if you then, as you say, if you don't have jobs for people who go in and if you're basically pricing people out of employment, then the entirety just ends up falling in the state. And yeah, so I do think and put this way, I don't think the productivity again was the driver for these changes, and I don't think it's going to be something that we get out of these changes for exactly the reasons you've just outlined.
Okay, deep side it all round on from that, John, and I you know, listen, as we do not have a solution to this problem. We are simply pointing out what is happening. If you make it employing people more expensive, a fewer people will be employed, and that there are consequences. Are you listening, Rachelryes, Please please occasionally listen to us.
We would really appreciate it. Anyway.
This kind of thing makes life difficult for the Bank of England, though of course their mandate is not employment, it is inflation. But they found themselves in a situation where we have this increasingly obvious employment problem, but we also have inflation.
So what do they do?
John, Well, they did, Actually, they did exactly where everyone expected them we do. They've kept interest rates at four percent. The chances are very high now that there won't be another rate cut this year. The thing that everyone was keeping an eye on this time was quantitative tightening, which is the rate at which they're getting ready of the gelts on their balance sheet. But even then that wasn't particularly exciting because they did roughly what the market expected.
And I mean it's meant to reduce pressure on the very far out maturities, so like thirty years gut yields, ten years gult yields doesn't actually seem to have because I guess the market had already praised, and them cutting back on and selling the longer dated gilts, so really all around sort of a damp squab and really just points to what we've already, you know, already been saying kind of rubbish labor market, rubbish inflation figures. I mean, of course, but they kind of The next chief execus
said something quite similar. He was saying, I don't expect the UK accordomay fall off a cliff, but I do expect and you make growth and this general sense of a lack of dynamism, and I think the Bank England's kind of the dilemma is that it can't actually do anything about any of that.
As an aside, I think i'd ask everyone who hasn't yet to go and listen to our podcast with the Professor dta Helm on energy costs. There's a lot of discussion and energy costs at the end of this week, because in video the CEO of Vidia pointing out that if we want to have an AI revolution in the UK, we're going to need to use an awful lot of gas, which doesn't fit into the UK's ideas at the moment. So it's worth listening to that podcast just to.
It was just a really good podcast.
It was fantastic, Yeah, very well explained.
And I thought, I just it's the first taine that I've properly heard someone explain in normal human language. But the actual problem.
It's so it's important to listen to that one, and then to go back also and listen to the one we did a few months ago with Callum Pickering where we talk about the effect that expensive energy really has on growth. These two things are so important at the moment as we languish around the place with rubbish employment, rubbish growth, highish inflation, and interest rates not quite where people would have liked them to be. And I actually can't remember now, which is the way, of course economists
like it to be. But I can no longer remember what everyone was predicting interest rates in the UK would be at the moment this time last year.
It was definitely lower. It was it started with a three rather than a four.
Yeah, yeah, yeah.
And I will say you know that we are planning, and this is very exciting for all of you listening.
We are planning to start videoing our podcast.
And with that in mind, I have been tidying my bookshelf shot Corra. I know that no one knows me welcome really put the word tidying and merin in the same sentence. But along the way, I'm finding all sorts of fascinating books which are a reminder of just how many mistakes everybody makes all the time.
So I've got hang on.
So two that I pulled out this morning, The Coming Collapse of China, written by Gordon G.
Chang in twenty twelve.
World on Gordon, and then in the early nineties Bill I'm at the editor of The Economist Japan's Global Reach, all about the amazingness of Japanese, Japan's multinational companies. That's not quite so idiotic. Well recently that was I think nineteen ninety two.
Oh, fantastic, two years after the bubble hit already.
Yeah, yeah, yeah, And of course you know Japanese companies, many of them are still amazing still with still huge multinationals. But obviously that was still a bubble book. So it's fascinating. And I'm looking out now as you should, as should you be, John, for the book that's going to tell us that the AI bubble is bursting. It should come out just at the very top of that, how AI makes everything different, changes the world, et cetera, et cetera.
God, God, we're getting old. We're getting old. We've got to stop this right.
This one's just coming out. Oh god. It was basically if anyone builds this, everyone will die. So that's quite a top of the market Headley, I think it is.
And that's exactly the kind of thing that makes me really glad that most books are wrong.
Yeah, well, yeah, exactly. I would prevail that that is not the keys.
Yeah, okay, let's move ourselves over to talk about the FED, which actually managed to cut interest rates. So we now have a divergent policies between the easy be the Bank of England and and the FED, which has now cut Where are we now, don't you four point two five four point two five percent?
So hi Evan was but nonetheless coming down.
Yeah, I think the interesting thing is basically the FEDS.
I mean, obviously the US and much better economy, but the Fed's kind of facing a similar issue in the Bank of England and the inflation still persistent, but employment looks wobbly, and so the kind of conversation around this cut was because some people had thought they could either they could maybe go for a big half point cut, or they could even have possibly stayed flat, but most people expected the quarter point and that's that's what we got.
And the kind of conversation around it was not that different to the conversation here, which is, well, inflation is still kind of a bit too strong for comfort, but employment could go either way. And I think within that there was a lot of talk about whether political pressure would make the Fed act in a certain way, a more dubbish way, obviously, because Trump would like them to cut interest rates, but it's not clear to me that
that's actually had any effect. I mean, I think that in the absence of political pressure that they've done exactly this same thing. So at the moment, I feel that this idea that we're going to go back to a kind of nineteen seventies after Buddn's situation getting bullied by you know, Richard Nixon, it doesn't strike me as holding as much water as some people would like it to hold, but we'll see.
Okay, It's important to remember that, you know, the FED do have more of a focus on employment than the than the Bank of England, so it is slightly different.
Yeah, it's easier for them rationalized rate cuts on that basis. But I said, I don't think that's really to do with Donald Trump getting under your own power. Skinning is more about this is just what you would do in this situation. You know, we put too much stock in central bank's abilities to control the economy. Anyway. But that's a that's a whole other podcast.
I'm looking forward to that one.
It's been a whole half hour complaining about central banks, a central bank and their god delusions.
We've never done that before.
We have it anyway, John, I don't want to go on for too long because I know you're still recovering.
From your holidays, so we'll leave We'll leave it there and more on all of this next week.
Thanks for listening to this week's Merrin Talks Money Debrief.
If you like a show, rate review, and subscribe wherever you listen to podcasts. Also be sure to follow me and John on x or Twitter at marinas w and John Underscore Stepic. This episode was produced by Samasadi Production, sport and sound design by Moses and Questions and comments on this show and all our shows are always welcome. Our show email is Merri Money at Bloomberg, dot nex