Bank of England's Haldane blasts 'Chicken Licken' pessimism; US payroll growth swells – as it happened

Time for a quick recap.

The Bank of England’s top economist has warned that pessimism about the UK recovery could hurt growth.

Andy Haldane hit out at ‘Chicken Licken’ pessimism, arguing that Covid-19 restrictions, rising unemployment and Brexit were all less serious threats than doomsters suggest.

Haldane declared:

If the economy were sat on a psychiatrist’s sofa, the diagnosis would not be especially difficult. A propensity to dismiss good news and dwell on bad? To catastrophize about the future? The sense of events being beyond our control? These are the psychological symptoms of anxiety. And collective anxiety is as contagious, and could be as damaging to our well-being, as this terrible disease.

Averting an economic anxiety attack calls for a balanced and flexible approach to the words and actions of businesses and policymakers. Planning for the worst is important, but needs to be accompanied by hope for the best. Encouraging news about the present needs not to be drowned out by fears for the future. Now is not the time for the economics of Chicken Licken.

Haldane also argued against cutting UK interest rate below zero, arguing that negative interest rates can’t currently be justified.

But...a swathe of job cuts show that the economy is still bruised from the pandemic. Royal Dutch Shell is slashing up to 9,000 positions over the next couple of years, as it tries to cut costs and move towards low-carbon energy sources.

UK bank TSB is cutting around 900 jobs, as part of a branch closure plan.

It’s also been a busy day for takeover news, with American gambling firm swooping on William Hill....and Canadian security group GardaWorld launching a hostile bid for rival G4S.

On the economic front, more jobs were created in America this month than expected. Private payrolls rose by almost 750,ooo in September, according to ADP.

UK house prices have also hit a new high, rising by 5% in the last 12 months.

Stocks have risen on Wall Street, as investors are cheered by the rise in US payrolls. London’s stock market has turned positive too, with the FTSE 100 now up 14 points or 0.2%.

Newsflash: US companies created nearly three quarters of a million jobs this month, as the labor market recovery continued.

That’s according to ADP, the payroll operator. It reports that private sector employment in America rose by 749,000 during September, up from an 481,000 in August.

Employment gains were made across the US economy, ADP say.

Small firms took on 192,000 more employees, while mid-sized firms (from 50 to 499 workers) hired 259,000. Large employers recruited 297,000 more staff.

ADP also reports that service sector companies hired 552,000 more workers, while goods producers added 196,000 to their payrolls.

That’s a stronger reading than expected - economists had forecast around 600,000 new jobs this month. August’s figure has been revised up too, from 428,000.

This may be a sign that Friday’s non-farm payroll - the US government’s official jobs report - will be solid.

Although, ADP and the NFP haven’t been closely correlated recently, so we’ll find out in 48 hours.....

Canadian security firm GardaWorld has launched a hostile £3bn takeover bid for its UK rival, G4S.

Having been rebuffed by G4S’s management, GardaWorld is taking its offer direct to G4S’s shareholders.

In a punchy statement to the City, GardaWorld says G4S has failed its stakeholders over the last decade, and needs better management.

GardaWorld CEO Stephan Crétier says:

“G4S is a deeply troubled business which needs a committed owner-operator team that understands the sector and has a definitive and comprehensive plan. Stakeholders can take no confidence in the promises of a senior management team that has been in place for seven years and has not delivered for shareholders, customers, employees or the public.

“The G4S Board has behaved in a cavalier way by rejecting our potential offer out of hand. We look forward to meeting with investors to explain the challenges ahead and why this is a full and fair price for an asset which faces turbulent times and difficult operating conditions.”

GardaWorld’s offer is worth 190p per share - but today’s move has pushed G4S’s stock up to 197p, as traders anticipate a higher bid will be needed.

G4S was trading at below 150p earlier this month, before GardaWorld’s interest emerged.

G4S has experienced a litany of problems in recent years, as my colleague Simon Goodley wrote:

G4S has 533,000 employees across 85 countries, with its biggest business in North America. It runs cash handling services and security operations, and is also managing 21 Covid-19 test centres in the UK. It runs four prisons in the UK – in Liverpool, near Rugby, Wolverhampton and Wales – but the majority of its contracts are corporate. It provides security at the Hinkley Point C nuclear power station and at Thames Tideway, London’s new super sewer that is still being built.

However, it was stripped of its contract to run HMP Birmingham after rioting forced the government to call in Tornado squads, officers specialising in quelling disturbances. It also lost the contract to run Medway secure training centre, after allegations of mistreatment of children, and the contract to run the Rainsbrook young offender facility. It pulled out of the immigration and asylum sector a year ago, after undercover footage from BBC’s Panorama showed G4S officials mocking, abusing and assaulting detainees at the Brook House facility.

In contrast to Andy Haldane’s upbeat outlook, high street bank TSB has just announced large job cuts -- adding to the 9,000 positions going at Shell.

TSB will cut almost 1,000 jobs as it closes 164 branches around the UK, blaming the declining number of customers visiting their local bank.

TSB will make 969 people redundant, while adding another 120 new jobs in operational role. The bank will seek to make the reductions through voluntary redundancies.

TSB said 94% of its customers would still be within 20 minutes of a branch, and that the network would be the seventh largest in the UK.

Debbie Crosbie, TSB’s chief executive, said:

Closing any of our branches is never an easy decision, but our customers are banking differently – with a marked shift to digital banking. We remain committed to our branch network and will retain one of the largest in the UK.”

Haldane has also taken a swipe at the press for being too negative.

According to the Bank of England’s chief economist, we blundered last month by reporting that Britain had fallen into its worst ever recession.

Apparently, we shouldn’t have focused on the 20% plunge in activity in April-June, but should have instead hailed the 9% growth recorded in June alone.

Giving Fleet Street a weary sigh, Haldane chides that:

A particularly revealing episode is associated with the notable spike in the pessimism ratio on the 12 August.

This was when the Office for National Statistics published second quarter GDP figures for the UK. These showed a huge fall of over 20% in GDP, the largest quarterly fall on record by far. This, understandably, was one of the top three new stories on the day. Here are some of the headlines that accompanied it:

Yet the irony is that the only news in this release was GDP growth for the month of June, the final month of the quarter. This saw an almost 9% rise in activity, by far the largest rise in any month ever and above market expectations. Yet negative media headlines outnumbered positives by many multiples.

Positive economic news was media-filtered into an extreme negative event

We’re grateful for the feedback. But don’t forget, this was the moment that Britain suffered its worst ever downturn, and officially entered recession. That’s news, not “Chicken Licken” gloom.

Andy Haldane also pours cold water on the suggestion that UK interest rates could be cut below zero.

He insists that the Bank’s Monetary Policy Committee is not close to introducing negative rates, even though the BoE has begun conducting operational work on the issue.

Haldane tells the Cheshire and Warrington LEP Economic Summit Webinar that:

Judgements on negative rates will depend on the economic outlook at the time and in particular on whether that necessitates further monetary stimulus. If that condition was satisfied, any decision on negative rates would then depend on whether the balance of costs and benefits from using this tool was positive and whether this cost/benefit balance favoured negative rates over other monetary tools.

All three of these conditions would need to be satisfied before negative rates became a reality. At present, none of those conditions is in my view satisfied

Andy Haldane points out that consumer spending has been stronger than expected since the lockdown began - a sign that the economy sky isn’t tumbling down.

The simplest explanation for the upside surprises to UK activity over recent months would be that lockdown measures have been released sooner and faster than expected. But the pace of release from lockdown in the UK has in fact been broadly in line with what the Bank had expected in May. The biggest surprise has been the robustness of peoples’ spending behaviour in the face of lockdown constraints and other risks, not the evolution of these constraints and risks per se.

The behaviour of UK consumers has been most surprising. Based on our suite of fast indicators, UK consumption has been rising by, on average, around 2% per week since May.

As best we can tell, consumer spending now stands at around pre-Covid levels. In other words, consumption has fully recovered more than a year earlier than the Bank expected as recently as August. Large-ticket purchases, such as cars and houses, are also back to around pre-Covid levels.

Against a backdrop of more than 40,000 Covid-related deaths, an extra 1 million people unemployed and perhaps a quarter of the workforce having faced a cut in their incomes, the speed and scale of this recovery in consumption is, I think, fairly remarkable.

Haldane has also drawn up a ‘misery index’, which plots unemployment and inflation. It’s likely to worsen significantly as job losses increase, but is likely to remain below its levels after the financial crisis:

The chief economist at the Bank of England has hit out at anxiety over the UK economy, saying that undue pessimism will intensify the damage caused by Covid-19.

In a speech just released, Andy Haldane argues that good news on the economy is being crowded-out by fears about the future.

These worries are creating excess caution, fear and fatalism, Haldane argues, just at the point where the economy desperately needs optimism - not a ‘Chicken Licken’ panic that the sky is falling down.

Haldane points out that millions of jobs were saved earlier this year by the furlough scheme, adding that much of the output lost during the pandemic has been recovered.

We now expect GDP to be around 3-4% below its pre-Covid level by the end of the third quarter. In other words, the economy has already recovered just under 90% of its earlier losses.

Channelling one of America’s great presidents, Haldane says that he has “a Rooseveltian fear of fear itself”:

If the economy were sat on a psychiatrist’s sofa, the diagnosis would not be especially difficult. A propensity to dismiss good news and dwell on bad? To catastrophize about the future? The sense of events being beyond our control? These are the psychological symptoms of anxiety. And collective anxiety is as contagious, and could be as damaging to our well-being, as this terrible disease.

Averting an economic anxiety attack calls for a balanced and flexible approach to the words and actions of businesses and policymakers. Planning for the worst is important, but needs to be accompanied by hope for the best. Encouraging news about the present needs not to be drowned out by fears for the future. Now is not the time for the economics of Chicken Licken.

This rather chimes with last week’s speech by chancellor Rishi Sunak, who called for people to “learn to live” with the crisis, and “live without fear” .

UK house prices hit a record high last month, over £266,000 for the first time, as the market picked up momentum.

As flagged earlier, prices have jumped by 5% over the last year, with most regions seeing an acceleration in prices over the last quarter.

Robert Gardner, Nationwide’s Chief Economist, says the stamp duty holiday and pent-up demand are both pushing prices up.

Plus, some families are keen for more space, after months of unplanned home-working and home-schooling.

Gardner says:

“UK house prices increased by 0.9% month-on-month in September, after taking account of seasonal effects, following a 2.0% rise in August. As a result, there was a further pick up in annual house price growth from 3.7% in August to 5.0% in September - the highest level since September 2016.

“Housing market activity has recovered strongly in recent months. Mortgage approvals for house purchase rose from c66,000 in July to almost 85,000 in August - the highest since 2007, well above the monthly average of 66,000 prevailing in 2019.

“The rebound reflects a number of factors. Pent-up demand is coming through, with decisions taken to move before lockdown now progressing. The stamp duty holiday is adding to momentum by bringing purchases forward. Behavioural shifts may also be boosting activity as people reassess their housing needs and preferences as a result of life in lockdown.

Over in Germany, the jobless rate has fallen as Europe’s largest economy continues to recovery from the pandemic.

The German labour office reports that the number of people out of work fell by 8,000 in seasonally adjusted terms to 2.907 million. That pulled the unemployment rate down to 6.3%, from 6.4%.

The number of people on short-time work schemes also fell, but remained extremely high, at 4.24 million in July, down from nearly 6m in April.

Under Germany’s Kurzarbeit scheme, the government pays employees’ wages for time when they’re not working (and is more generous than the UK’s new scheme, which only covers a third of unworked hours).

The US casino operator Caesars Entertainment is claiming victory today in its pursuit of British bookmaker William Hill.

William Hill has agreed to be taken over by Caesars in a £2.9bn deal, just days after a bidding war broke out - with private equity firm Apollo also in the running.

My colleague Jasper Jolly explains:

The deal, which must be agreed by 75% of William Hill shareholders, was unanimously recommended by the UK company’s directors. It came after two rival bids by the US private equity group Apollo were turned down.

The takeover will give Caesars, the operator of the Caesars Palace casino in Las Vegas, access to the burgeoning US sports betting market. Caesars also owns various casinos in the UK.

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

We start with some breaking news -- oil giant Royal Dutch Shell is cutting up to 9,000 jobs as it overhauls its operations towards greener energy sources.

The cuts equate to around one in ten staff across Shell, adding to the swathe of jobs lost this year since Covid-19 plunged the world into a deep recession.

Ben van Beurden, Shell’s CEO, announced the cutbacks this morning. As well as cutting costs, he argues they will help Shell become a net-zero emissions energy business within 30 years.

Van Beurden says that a major restructuring is now needed:

It is very painful to know that you will end up saying goodbye to quite a few good people. I know I, and many others in Shell, will be saying goodbye to people we know well and really like and who have great loyalty to the company. But we are doing this because we have to, because it is the right thing to do for the future of the company.

We have to be a simpler, more streamlined, more competitive organisation that is more nimble and able to respond to customers.

And that means massive job cuts, Van Beurden warns:

COVID-19 has shown we can work very effectively in ways we did not think we were ready for yet. But a large part of the cost saving for Shell will come from having fewer people.

We do not have an exact figure because the details are still being worked out, and we have never had a target to reduce a particular number of jobs. But we can say that, because of the efficiencies we expect to gain, we will reduce between 7,000 and 9,000 jobs by the end of 2022.

This includes around 1,500 people who have already agreed to take voluntary redundancy this year, but excludes any who may leave Shell because of divestments.

The sweeping jobs cuts are part of a plan to save Shell between $2bn and $2.5bn per year -- as it also wrestles with the slump in the oil price since the Covid-19 pandemic, and the hit to energy demand.

We’ve also just learned that UK house prices continued to rise sharply last month, increasing at the fastest rate in four years.

Nationwide has reported that:

• Annual price growth picked up to 5.0% in September, the highest rate since Sep 2016
• Prices rose 0.9% month-on-month, after taking account of seasonal factors
• Most regions saw a pickup in house price growth rates in Q3

Stock markets are expected to fall back today, as investors recoil from a bitter and chaotic presidential debate overnight in which Donald Trump repeatedly interrupted Joe Biden, attacked mail-in balloting, and failed to denounce white supremacist violence .

The agenda

• 8.20am BST: European Central Bank president Christine Lagarde at The ECB and its Watchers XXI Conference in Frankfurt
• 8.55am BST: German unemployment data for September
• 9.30am BST: Bank of England’s chief economist Andy Haldane speaks at the Cheshire and Warrington LEP Economic Summit
• 1.15pm BST: The ADP survey of private sector US job creation in September
• 3.30pm BST: The weekly EIA crude oil inventory figures