Finance
The hiring rate trending lower could be a sign of problems to come
A version of this post first appeared on TKer.co
The stock market climbed to all-time highs, with the S&P 500 setting a closing high of 5,762.48 on Monday. For the week, the S&P rose 0.2% to end at 5,751.07. The index is now up 20.6% year to date and up 60.4% from its October 12, 2022 .
On Friday, we learned the U.S. economy created a healthy 254,000 net new jobs in September. While the number confirms that the labor market isn’t falling apart, the pace of net job creation in this economic cycle.
One labor market indicator that’s been drawing more attention lately is the . In addition to measuring those hired into newly created jobs, this metric also captures those hired into existing jobs vacated by quitters, fired workers, and others. It’s been trending lower, and it .
According to the report, employers hired 5.32 million workers in August. While hires far exceed the 1.61 million people laid off during the period, the hiring rate — the number of hires as a percentage of the employed workforce — has fallen to 3.1%, matching the lowest level of the current economic cycle.
As we’ve been discussing , the layoff rate has , trending at around 1%, which is below prepandemic levels. That’s a good thing.
But with , we should be at least a little wary about resting on the economy’s low layoff laurels.
“The hiring rate turns BEFORE layoffs,” Renaissance Macro’s Neil Dutta explained in a research note on Tuesday.
When you think about how well-managed companies operate, this makes sense.
Managers know that a hiring freeze isn’t great news
When the economic tides begin to go out, companies usually don’t go from hiring people one month to immediately sending workers to the unemployment office in the next month.
Unless you’re facing a major business or economic calamity, you probably don’t want to take a hatchet to the headcount. Because what if business activity quickly turns around and you need those workers?
For starters, companies can reduce or freeze hiring, which means not filling new job openings or backfilling roles vacated by former employees. It’s a relatively easy way to keep expenses contained.
If challenges persist, then layoffs could be the next option.
It’s worth mentioning that layoff activity does not need to increase for the unemployment rate to rise. Think about it. Even when the economy is booming, — but many will quickly go back to work if hiring activity is strong. If the same number of people get laid off into an economy with weakening hiring activity, then more jobseekers will not be able to get back to work, and unemployment rises.
Stay vigilant
The JOLTS survey — which provides data on job openings, hiring activity, layoffs, and quits — can be helpful in predicting what’s to come for the major headline economic metrics like net job creation, the unemployment rate, and inflation.
For example, when the posted by employers is high and rising, then you can expect payroll employment to rise and the unemployment rate to fall or stay low. An could be a reflection of worker confidence in a labor market with increasingly competitive wages, which is a .
Today, with but the layoff rate still depressed, the JOLTS metric to watch right now may be the falling hiring rate.
The question now is whether the economy, , will develop in a way that helps stabilize or improve the hiring rate. Friday’s news that the U.S. continues to create jobs at a healthy pace is encouraging.
And to be crystal clear, most metrics point to a strong economy that continues to grow at a healthy clip. In fact, the hiring rate today is higher than where it was during much of the 2009-2020 economic expansion. Our discussion today is not about sounding alarms. However, we should always be mindful of the fact that . And those downturns often come with early warning signs.
Reviewing the macro crosscurrents
There were a few notable data points and macroeconomic developments from last week to consider:
The labor market continues to add jobs. According to the report released Friday, U.S. employers added 254,000 jobs in September. It was the 45th straight month of gains, reaffirming an economy with growing demand for labor.
Total payroll employment is at a record 159.1 million jobs, up 6.8 million from the prepandemic high.
The unemployment rate — that is, the number of workers who identify as unemployed as a percentage of the civilian labor force — declined to 4.1% during the month. While it continues to hover near 50-year lows, the metric is near its highest level since October 2021.
While the major metrics continue to reflect job growth and low unemployment, the labor market isn’t as hot as it used to be.
Wage growth ticks up. Average hourly earnings rose by 0.4% month-over-month in September, up from the 0.5% pace in August. On a year-over-year basis, this metric is up 4.0%.
Job openings rise. According to the , employers had 8.04 million job openings in August, up from 7.71 million in July. While this remains slightly above prepandemic levels, it’s from the March 2022 high of 12.18 million.
During the period, there were 7.12 million unemployed people — meaning there were 1.13 job openings per unemployed person. Once a sign of , this telling metric is now below prepandemic levels.
Layoffs remain depressed. Employers laid off 1.61 million people in August. While challenging for all those affected, this figure represents just 1.0% of total employment. This metric continues to trend near pre-pandemic low levels.
Hiring activity, while cooling, continues to be much higher than layoff activity. During the month, employers hired 5.32 million people, down from 5.42 million in July.
People are quitting less. In August, 3.08 million workers quit their jobs. This represents 1.9% of the workforce. It continues to move below the prepandemic trend.
A low quits rate could mean a number of things: more people are satisfied with their job; workers have fewer outside job opportunities; wage growth is cooling; productivity will improve as fewer people are entering new unfamiliar roles.
Job switchers still get better pay. According to , which tracks private payrolls and employs a different methodology than the BLS, annual pay growth in September for people who changed jobs was up 6.6% from a year ago. For those who stayed at their job, pay growth was 4.7%.
Unemployment claims tick higher. rose to to 225,000 during the week ending September 28, down from 219,000 the week prior. This metric continues to be at levels historically associated with economic growth.
Card spending data is holding up. From JPMorgan: “As of 25 Sep 2024, our Chase Consumer Card spending data (unadjusted) was 0.6% above the same day last year. Based on the Chase Consumer Card data through 25 Sep 2024, our estimate of the U.S. Census September control measure of retail sales m/m is 0.13%.“
Gas prices fall. From : “Despite literal and figurative storm clouds here and abroad, the national average for a gallon of gas still fell by three cents from last week to $3.19. The devastation wrought by Hurricane Helene did little to impact gasoline supply, but it crushed demand in affected areas by destroying infrastructure and causing power outages.”
Mortgage rates tick higher. According to , the average 30-year fixed-rate mortgage rose to 6.12%, up from 6.08% last week. From Freddie Mac: “The decline in mortgage rates has stalled due to a mix of escalating geopolitical tensions and a rebound in short-term rates that indicate the market’s enthusiasm on rate cuts was premature. Zooming out to the bigger picture, mortgage rates have declined one and a half percentage points over the last 12 months, home price growth is slowing, inventory is increasing, and incomes continue to rise. As a result, the backdrop for homebuyers this fall is improving and should continue through the rest of the year.”
There are in the U.S., of which 86 million are and of which are . Of those carrying mortgage debt, almost all have , and most of those mortgages before rates surged from 2021 lows. All of this is to say: Most homeowners are not particularly sensitive to movements in home prices or mortgage rates.
Construction spending ticks lower. declined 0.1% to an annual rate of $2.13 trillion in August.
Manufacturing surveys don’t look great. From S&P Global’s : “The September PMI survey brings a whole slew of disappointing economic indicators regarding the health of the US economy. Factories reported the largest monthly drop in production for 15 months in response to a slump in new orders, in turn driving further reductions in employment and input buying as producers scaled back operating capacity.”
Similarly, the ISM’s signaled contraction in the industry.
Keep in mind that during times of perceived stress, soft survey data tends to be more exaggerated than hard data.
Services surveys look great. From S&P Global’s : “U.S. service sector businesses reported a strong end to the third quarter, with output continuing to grow at one of the fastest rates seen over the past two-and-a-half years. After GDP rose at a 3.0% rate in the second quarter, a similar strong performance looks likely in the three months to September. Encouragingly, inflows of new business in the service sector grew at a rate only marginally shy of August’s 27-month high. Lower interest rates have already been reported by survey contributors as having buoyed demand, notably for financial services which, alongside healthcare, remains an especially strong performing sector.”
Near-term GDP growth estimates remain positive. The sees real GDP growth climbing at a 2.5% rate in Q3:
Putting it all together
We continue to get evidence that we are experiencing a where inflation cools to manageable levels .
This comes as the Federal Reserve continues to employ very tight monetary policy in its . More recently, with inflation rates having from their 2022 highs, the Fed has taken a less hawkish stance in — even .
It would take monetary policy as being loose or even neutral, which means we should be prepared for relatively tight financial conditions (e.g., higher interest rates, tighter lending standards, and lower stock valuations) to linger. All this means for the time being, and the risk the into a recession will be relatively elevated.
At the same time, we also know that stocks are discounting mechanisms — meaning that .
Also, it’s important to remember that while recession risks may be elevated, . Unemployed people are , and those with jobs are getting raises.
Similarly, as many corporations . Even as the threat of higher debt servicing costs looms, give corporations room to absorb higher costs.
At this point, any given that the .
And as always, should remember that and are just when you enter the stock market with the aim of generating long-term returns. While , the long-run outlook for stocks .
A version of this post first appeared on TKer.co
A look at the rise Israel’s finance minister who has become perhaps the most influential man in the country, alongside Prime Minister Benjamin Netanyahu.
MARY LOUISE KELLY, HOST:
Israel’s finance minister has become arguably the most influential man in the country, alongside Prime Minister Benjamin Netanyahu. He’s an ultranationalist and a West Bank settler who has repeatedly called for Israel to resettle the Gaza Strip. He has threatened to collapse Netanyahu’s government if the war in Gaza ends. And this week, the war resumed after a 42-day ceasefire ended with Israeli strikes that killed more than 400 Palestinians. NPR’s Hadeel Al-Shalchi looks into his rise to power in Israel.
HADEEL AL-SHALCHI, BYLINE: Israeli Finance Minister Bezalel Smotrich was once a wanted man by Israel’s version of the FBI. In 2005, Israel was rocked by mass protests. Israeli settlers were demonstrating against the removal of Jewish settlements from Gaza. At the time, Dvir Kariv was an agent with Israel’s internal security agency, the Shin Bet.
DVIR KARIV: (Non-English language spoken).
AL-SHALCHI: Kariv says late on July 11, 2005, they raided a home in central Israel.
KARIV: (Non-English language spoken).
AL-SHALCHI: He says, in the basement, we found several jerry cans filled with a lot of oil and fuel.
KARIV: (Non-English language spoken).
AL-SHALCHI: They arrested five people there. One of them was a student called Bezalel Smotrich. Kariv says the men were interrogated for 3 1/2 weeks.
KARIV: (Non-English language spoken).
AL-SHALCHI: “From the Shin Bet’s perspective, we successfully thwarted what Bezalel Smotrich and his group had planned,” Kariv says. While he says he can’t divulge what that was, Israeli media has reported that Smotrich and his group were planning to blow up a major Israeli highway. Smotrich remained completely silent during his interrogations and was released without charge. He did not give away his secrets, but later, as a politician, he spoke a lot about what drives his political motivations.
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BEZALEL SMOTRICH: (Non-English language spoken).
AL-SHALCHI: “My long-term desire is for the state of Israel to be governed according to the Torah or Jewish holy scripture,” he once told Israeli radio.
Smotrich is an ultranationalist religious Zionist, a type of Judaism that branched out from the secular Zionist movement that founded Israel. While many ultrareligious Jews historically rejected the Zionist movement, a minority accepted it. Many of them embraced the settlement movement after Israel took control of the West Bank and Gaza Strip in the war of 1967. Tomer Persico is a scholar of Jewish extremism.
TOMER PERSICO: The more Jews settle the lands that the state of Israel has conquered, the more redemption is coming close. So it’s a Messianic movement – very motivated, pious and devoted religion.
AL-SHALCHI: Persico says Smotrich is on the far right of the spectrum of religious Zionism, also known as ultra-Orthodox nationalists, who follow Jewish law and reject values like feminism, liberalism and LGBTQ rights. Smotrich and his followers believe that the Israeli-occupied West Bank is the Jewish people’s ancestral home featured in the Bible, a God-given land they must make a permanent part of Israel.
Smotrich, a lawyer, was first elected to parliament in 2015. Two years later, he wrote a manifesto called “Israel’s Decisive Plan.” In it, he writes how to tackle the main obstacle to settling the West Bank – the Palestinians.
PERSICO: Smotrich gives the Palestinians basically three options – emigrate, surrender and live as, let’s say, subjects without the right to vote, or fight and die.
AL-SHALCHI: Only a few years later, Smotrich became the leader of the Religious Zionist Party. Ohad Tal is a lawmaker in Smotrich’s party.
OHAD TAL: I think that he’s a very clever and smart person who understands the reality. He’s presented as somebody radical because people find it hard to accept the truth.
AL-SHALCHI: Smotrich was perfectly poised for what happened in the most recent Israeli national election. Prime Minister Benjamin Netanyahu won and looked for allies to form a coalition, but he’s facing trial on corruption charges. Persico says Netanyahu was desperate.
PERSICO: He didn’t have anyone else. Because of his ongoing trial, people said they would not sit in parliament with him.
AL-SHALCHI: The only parties that would agree to form a government with Netanyahu were the ultra-Orthodox and religious Zionists, including Smotrich’s party. Netanyahu formed a coalition with them, giving them more power than they had ever had before. The prime minister appointed Smotrich as finance minister and to the Ministry of Defense. Jewish extremism scholar Persico.
PERSICO: And in that position, he has basically taken over the civil management of settlers in the occupied territories, meaning he is on the verge of official annexation.
AL-SHALCHI: After the October 2023 attacks on Israel, Netanyahu called on Smotrich to be part of his war cabinet. The finance minister reached for his faith.
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SMOTRICH: (Non-English language spoken).
AL-SHALCHI: “I struggled with this decision and gathered my rabbis to consult with them. After all, I want to influence the war,” he told a group of religious students last year in a video posted online.
Smotrich is reported to regularly consult with a group of rabbis known as the Five. Rabbi Yehoshua Shapira is one of them. He has opposed a hostage deal.
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YEHOSHUA SHAPIRA: (Non-English language spoken).
AL-SHALCHI: “There is joy that hostages will return, but despite that joy, this is a very bad deal for Israel,” Shapira said in an online lecture.
Persico says Smotrich’s faithful devotion is evident every time he threatens to collapse Netanyahu’s coalition if the war doesn’t continue in Gaza, where he ultimately wants to see Jewish settlements rebuilt.
PERSICO: He is the primal force that is withholding the end of the war.
AL-SHALCHI: Smotrich has leveraged this power to further settler ambitions in the West Bank. Just days after Israel paused the war in January and agreed to a deal with Hamas for the release of hostages, Netanyahu ordered the escalation of incursions in the West Bank, causing massive destruction in urban refugee camps and displacing thousands of Palestinians. Israel says it’s to weed out Palestinian militants.
PERSICO: It’s very feasible to say this is just a card Netanyahu gave Smotrich in order to appease him when going into the hostage deal.
AL-SHALCHI: Smotrich was sidelined under President Biden’s administration for his anti-Palestinian rhetoric, and in Israel, polls show that he would not survive another election. Only 11% of the Israeli population voted for Smotrich’s party in the last elections in 2022. This month, Smotrich was invited to Washington, D.C., to meet with his counterpart in President Trump’s administration.
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SMOTRICH: (Non-English language spoken).
AL-SHALCHI: Smotrich rarely gives interviews to U.S. Western media. This month, he gave his first press conference since his trip to the U.S., and I posed a question to him.
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AL-SHALCHI: I have two questions. Do you know anything about…
I ask him about plans for the annexation of the West Bank. Smotrich objects to the word annexation.
(SOUNDBITE OF ARCHIVED RECORDING)
SMOTRICH: (Non-English language spoken).
AL-SHALCHI: “Annexation implies taking something that isn’t yours,” the minister says. “Judea and Samaria” – the biblical name for the West Bank – “belongs to us.”
Trump told reporters his administration would announce its position on West Bank annexation by early March. That date has passed.
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SMOTRICH: (Non-English language spoken).
AL-SHALCHI: Smotrich says, “Israel and the U.S. are in dialogue about it, and I prefer not to go into details.” I reply…
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AL-SHALCHI: Is Trump the man who will make it happen for you? Will he support you to make it happen?
SMOTRICH: (Non-English language spoken).
AL-SHALCHI: “We believe this is the right thing to do,” he says. “We’re engaged in discussions and dialogue.”
So while Smotrich firmly believes he has God’s mandate to take over the West Bank, the question is whether he also has Trump’s blessing.
Hadeel Al-Shalchi, NPR News, Jerusalem.
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Bokeh Capital Partners founder and chief investment officer Kimberly Forrest tells Yahoo Finance Head of News Myles Udland and Freedom Capital Markets chief global strategist Jay Woods that AT&T (T) is among her top stock picks.
Forrest explains that the company is “one of the providers of the pipelines of the internet and they get paid for it,” which is especially important as artificial intelligence (AI) tech evolves.
To watch more expert insights and analysis on the latest market action, check out more Catalysts here.
The Athletic has appointed Chris Weatherspoon as its first dedicated football finance writer. Chris is a chartered accountant who will be using his professional acumen as The BookKeeper to explore the money behind the game. He is starting with a series this week analysing the financial health of some of the Premier League’s biggest clubs.
You can read more about Chris and pitch him your ideas, and his first articles exploring the books at Manchester United, Manchester City and Arsenal.
At the beginning of March, Liverpool were surging under Arne Slot. Less than a fortnight ago, Slot’s first season at Anfield was geared up to be one of the greatest in club history. The Premier League was a procession. A Carabao Cup final awaited. The Champions League was theirs to snaffle up, too, after topping the revamped league stage.
Not so now. In the space of six days, Liverpool’s lofty season has tumbled. From looking so imperious during the Dutchman’s first six months at the helm, now Slot’s side are left with just the Premier League to play for — though it would take quite the implosion for that to fall out of their grasp. The Carabao Cup and Champions League are gone.
While those defeats against Newcastle United and Paris Saint-Germain both smarted, their financial ramifications differ wildly. Liverpool’s torpid display at Wembley against Newcastle will have hurt Merseyside pride, but the cost to club coffers is minimal; League Cup compensation is miserly, even for the winners. By contrast, coming out on the wrong side of the enthralling two-leg tie with Paris Saint-Germain has robbed them of a significant windfall.
Winning the revamped Champions League would have banked Liverpool €52.5million (£44m; $57m) more than they will now receive, not to mention a further €5m had they gone on to win the European Super Cup. They still earned an estimated €100m, underlining just how lucrative UEFA’s premier club contest has become.
This season should still bring record revenue for the club and that was the case last year too, even as Liverpool played in the Europa League. The club booked income of £613.8m in 2023-24, a £20m (three per cent) annual increase, despite broadcast revenue falling by £37.9m (16 per cent) without the Champions League.
That dip was partly offset by improved matchday income, as work on extending the Anfield Road End completed mid-season (Liverpool also received £8.6m in compensation for lost revenue after delays to the works), with the club making over £100m in gate receipts for the first time. They joined Manchester United, Arsenal and Tottenham Hotspur as the only English clubs to break that mark.
More consequential to the top line was Liverpool’s commercial income. The club-record £308.4m was an impressive 13 per cent increase on 2022-23. Commercial revenues have increased 42 per cent in five seasons, and more growth is on the horizon — a kit-manufacturer deal with Adidas, beginning in August 2025, is expected to generate even more than the club’s arrangement with Nike.
Despite the recent missteps, Slot’s side have still been wildly impressive for much of this season. Those 2023-24 financials, recently released, underlined the strength of foundation laid for him. Liverpool spent a net £0.1m on transfer fees this season and the squad has largely remained consistent between Slot and predecessor Jurgen Klopp.
Speaking of Klopp, the 2023-24 accounts confirmed he and his backroom staff had been rewarded for their significant efforts over the years with fully paid-up contracts, which cost Liverpool £9.6m. That went some way toward removing confusion about a wage bill that went up £13.2m in a season the club weren’t Champions League participants. That said, last year saw Liverpool book a £57.1m pre-tax loss, the worst financial result in the club’s history, and a stark departure from the £206.6m in profit they booked between 2017 and 2019.
What do Liverpool’s recent finances look like – and what’s their PSR position?
Fenway Sports Group’s (FSG) takeover of Liverpool in October 2010 bought them a club at a low ebb. It is easy to forget just how much financial peril Liverpool were in back then. While the Glazers had already made themselves the poster family of leveraged buyouts in English football, it wasn’t long before they had some willing pretenders.
Tom Hicks and George Gillett’s takeover of Liverpool in February 2007 borrowed straight from the playbook used at Old Trafford in 2005, but the ruinous impact on the club they bought arrived with far greater haste. Three years on from Hicks and Gillett rocking up at Anfield, Liverpool were on the hook for £378.4m of debt, £234m of it owed imminently to banks at chunky rates, the rest to a holding company moored in the Cayman Islands, with annual cash interest payments of £29.8m (comprising 16 per cent of the club’s entire total income, no less) having just contributed to a club record £54.9m loss. With the club’s auditors warning about Liverpool’s ability to survive, and fans in revolt, it took a High Court ruling to wrest the club from the grasp of its two American owners.
The resulting buyer, of course, was FSG. The group spent £230.4m on adding a Premier League football club to its portfolio and, though the early going was tricky — Liverpool lost a combined £139.6m during FSG’s first three seasons in charge, and hovered between sixth and eighth in the table — it ultimately transformed an institution on its uppers. Last season brought Liverpool’s worst pre-tax result but the club are close to breaking even during FSG’s tenure.
What’s more, even with that hefty loss, over the last decade Liverpool remain England’s most profitable club. Their £136.2m pre-tax profit between the 2014-15 season and 2023-24 is unmatched, with only Manchester City (£126.4m) coming anywhere close. Liverpool buck the trend and then some; over that time, only seven other Premier League or EFL Championship clubs were profitable.
It seems odd to declare a business in good shape on the back of a near-£60m loss, but Liverpool, at least in the context of football, are fine. Last season’s deficit was impacted by several things, not least that lack of Champions League football and the decision to pay up Klopp and his staff. Player sale profits drooped but will rebound this season, while player amortisation costs should remain static or even fall after the quiet activity last summer. Other than the reduced broadcast income, the biggest contributor to Liverpool’s increased loss was £29.2m in non-staff expenses excluding depreciation, a byproduct of the club’s increased commercial activity, the costs of hosting at a bigger stadium and general inflationary pressures. None of those costs will disappear this season, but improvements in income will offset the burden.
From the perspective of profit and sustainability rules (PSR), Liverpool had no issues last season even with that large loss. The club’s pre-tax loss over the three-year PSR cycle was £58.6m, £43.6m over their allowed loss of £15m. That loss limit is lower than the £105m maximum afforded to Premier League clubs, as FSG has not provided any equity funding in recent years. Yet Liverpool remain far from trouble once we deduct allowable costs — depreciation accounted for £39.2m of that three-year loss, and removing that already nearly gets the club back to the £15m limit. Our PSR calculation is necessarily heavy on estimates but, after the allowed deductions, The Athletic projects Liverpool had around £73m of PSR headroom in 2023-24.
Similarly, they should be free of trouble this season. Calculations where the final financial year of the PSR cycle hasn’t even ended yet are even more reliant on conjecture, but Liverpool will be safe from a regulatory standpoint. We estimate the club could lose £75m this season and still comply with Premier League PSR — and it is far more likely they’ll book a decent-sized profit in 2024-25.
UEFA’s PSR is different, with a lower loss limit and regulations dictating how much clubs can spend on their squads. Liverpool will be fine here, too, to the extent there’s little point going into too much depth. As a rough idea, on the latter squad cost ratio (SCR) rule that the European governing body requires clubs to comply with, The Athletic estimates Liverpool’s SCR figure was around 61 per cent last season and will be 53 per cent this year, both of which are comfortably within the respective 80 and 70 per cent limits.
Surging commercial income
Liverpool’s £613.8m revenue last season was a new club record, with their growth in commercial income the key contributing factor. Commercial revenue now comprises more than half of total revenue for the first time. What’s more, their commercial income is now second-highest in England, only trailing Manchester City. Tellingly, Liverpool’s £308.4m has outstripped Manchester United — a feat the Anfield outfit had never before managed (at least in the Premier League era). As recently as the 2015-16 season, United’s commercial activity out-earned Liverpool’s by £153m, so the latter really have made significant strides here.
Liverpool’s commercial income was higher last season even as United played in the Champions League while Anfield only hosted Europa League football, which perhaps reflects sponsors’ views on the longer-term trajectories of the two clubs.
Liverpool’s commercial income is driven by several big deals, including the kit supplier agreement with Nike now due to end on July 31 this year. That Nike deal only guaranteed the club a base of £30m per year, but uplifts including 20 per cent net royalties on club merchandise sales pushed their earnings from the deal over the £60m mark. The new Adidas agreement, accordingly, is expected to bring in yet more — albeit the incentivised nature of the deal does mean amounts can fluctuate according to sporting performance and global sales.
Other key commercial contracts behind that sizeable overall figure include front-of-shirt sponsorship with Standard Chartered (£50m per year), training centre naming rights and training kit sponsorship from Axa (£20m, since renewed at a slightly higher rate) and Expedia sleeve sponsorship (£15m). Liverpool entered new deals in 2023-24 with UPS, Orion Innovation, Google and Peloton, expected to bring in more than a combined £45m per season, to go alongside longstanding link-ups with Carlsberg, EA Sports and Nivea. The 2024-25 season has seen partnerships inked with Engelbert Strauss, Husqvarna, Japan Airlines and Visit Maldives.
Rising wages – but transfer fees trail rivals
When Deloitte released its annual Football Money League report in late January, plenty of Liverpool fans were bemused to learn the club’s annual wage bill had actually increased, even as they played in a lower European competition and several high-earners had left the previous summer. Only Manchester City’s wage bill was higher in the Premier League last year.
The subsequent release of the accounts helped explain the rise, with that Klopp pay-off being included in the wage figure — yet even without that, Liverpool’s wage bill still rose by £3.6m. The primary driver behind the increase was the club’s qualification for this season’s Champions League. A return to competition was secured in 2023-24, meaning Liverpool’s obligation to pay those bonuses crystallised last season. Correspondingly, the qualification bonuses were booked into the latest set of accounts.
Liverpool also happen to be one of English football’s biggest employers. To the end of last season, only Manchester United employed more administrative staff than Liverpool — and United are on the well-publicised path of cutting their workforce. Last season, Liverpool employed an average of 782 admin staff, only 30 behind United and 21 per cent higher than next-placed Chelsea (646 staff). Liverpool don’t split out player wages separate to their main wage bill, and UEFA no longer discloses them in reports that once did, but based on previous information the club’s non-playing wage bill landed at 21 to 22 per cent of overall staff costs. In 2022-23, that amounted to around £109m, not far shy of the £115m estimated non-player wages United spent that year.
Both clubs employ over 2,000 matchday staff, whose costs also fall into that bracket. While Liverpool’s administrative staff numbers only rose by 12 last season, the size of the club is such that their non-playing wage bill swamps every Championship club and even some at the bottom of the Premier League. Movements in the wage bill at clubs of this scale aren’t just brought about by new signings and sales.
While Liverpool are one of English football’s biggest wage payers, one area they have kept a firm handle on in recent years is transfer fees. The club’s player amortisation cost — the accounting impact of transfer fees, spread across the life of player contracts — was £114.5m last season, which, though a club record, sits a long way behind peers.
Liverpool are fifth in England in that regard, but the gulf to fourth-placed Manchester City (£165.1m) is over £50m, and Chelsea’s extreme activity in the transfer market means their amortisation bill isn’t far off double that at Anfield (£203.3m in 2022-23).
Liverpool’s amortisation figure has barely budged, growing just £2.7m (two per cent) since the 2018-19 season. Among the Premier League’s ‘Big Six’, that’s by far the lowest growth. In fact, it’s one of the lowest increases among last season’s top-tier teams, with only Everton and Crystal Palace reducing their amortisation bills over the last six years.
Liverpool’s transfer spending in recent years has been lower than their main domestic rivals, with a £562m gross spend on players in the last five seasons, and a £376.3m net spend in the same period each coming in as only England’s seventh-highest, trailing each of their ‘Big Six’ peers and Newcastle United. They may even drop to eighth once Aston Villa publish their 2023-24 accounts. That relatively low transfer spend helps explain why player amortisation costs have grown at a far slower rate than elsewhere. Of course, as we’ve seen, Liverpool have been one of the highest wage payers recently, choosing to retain star players for long periods.
Liverpool’s squad cost of £749.4m (as of May 31, 2024) is the seventh-highest in European football, and the fifth-highest in England, trailing Chelsea, the two Manchester outfits and Arsenal. The gap to the top four domestically is sizeable: Arsenal’s squad to the end of May 2024 cost £133m more than Liverpool’s to assemble. The club’s squad cost actually fell last season, despite a £194.5m spend on new players. Passing them on the way out was a cohort that had cost a collective £232.2m over the years, including Naby Keita, Fabinho, Alex Oxlade-Chamberlain, Roberto Firmino and Jordan Henderson.
Liverpool’s squad are on course to be the cheapest to win the title since the club last managed it in 2019-20.
This season’s champions-in-waiting cost around £350m (32 per cent) less to assemble than the group that notched City’s record fourth consecutive title last year.
That £194.5m spent on new players and contract extensions in 2023-24 — the former comprised principally of Dominik Szoboszlai, Alexis Mac Allister, Ryan Gravenberch and Waturo Endo — wasn’t a club record for a single season, but the amount of cash Liverpool dispensed on new signings was. The club’s cash outlay last year was £181.6m, while they recouped only £49.1m cash from player sales. That net cash spend on transfers of £132.5m was a new high, and by some margin too, comfortably eclipsing the net cash outflow of £89.5m in 2019-20.
Correspondingly, Liverpool use instalment payments in their transfer dealings far less frequently than their peers, with a net £69.9m fees owed being lower than 11 other Premier League clubs. They owe far less on transfers than some of their ‘Big Six’ rivals, with Manchester United (net transfer debt of £300.1m at the end of December 2024), Spurs (£268.7m, June 2023) and Arsenal (£229.3m, May 2024) all needing to meet transfer liabilities in excess of £200m. Chelsea, who don’t disclose transfer debts, are almost certainly above that level too. Liverpool’s much lower figure here should mean the club has more free cash for new transfer activity, as they’re not hamstrung by large payments on historic deals.
One final note on transfers concerns Liverpool’s selling abilities. The enormous sale of Philippe Coutinho to Barcelona in January 2018 was arguably the most successful deal in the club’s history, setting in train events that propelled them to domestic and European titles. Yet the bumper profit on Coutinho has also skewed the figures and might be hiding a problem area for the club when it comes to deriving value from the transfer market.
Over the past decade, Liverpool’s £453.9m profit on player sales is only bettered by Chelsea (£755.4m, 2014-23) and Manchester City (£583.7m, 2015-24). Yet limit looking back to just five years and it’s an altogether different story. Since the beginning of the 2019-20 season, Liverpool’s £150.1m in player-sale profits is bettered by nine other English clubs.
Some of that has been a choice, as Liverpool have generally held onto their stars, but it’s still a key area where they now appear at risk of falling behind. Nobody more obviously highlights that than Trent Alexander-Arnold, who the club are perilously close to losing for nothing this summer. Alexander-Arnold is only 26 and as recently as the start of the season was being valued at £75m, even with less than a year to run on his Liverpool contract.
Considerable investment in the long-term
Liverpool spent £56m on capital projects last season, principally on completing the extension of the Anfield Road End and buying back their old Melwood training ground, the latter so that it can be used by the women’s first team and academy. That’s the third-highest capital expenditure among Premier League clubs’ most recent financials, only topped by Everton (Bramley-Moore Dock Stadium build) and Manchester City (Etihad Stadium extension and surrounding works).
More notably, it took Liverpool’s total investment in capital works to £368.4m in the past decade. For context, that’s the highest of any English club that wasn’t building a brand new stadium in the same timespan, with only Tottenham Hotspur and Everton undertaking greater capital spending. Liverpool’s expenditure was over £100m more than Manchester City (though they’ll reduce that gap this season through those Etihad works), and over £200m more than each of Manchester United, Arsenal and Chelsea. Much of that cost has gone on improving and expanding Anfield. Liverpool’s home capacity is now 61,276 — over 16,000 higher than 10 years ago.
Sustainability: A key plank of FSG’s strategy
With such hefty spending on capital projects last year and that huge cash outflow on players, alongside a cash balance at the end of May 2023 of just £3.4m, a pretty obvious question arises: where did Liverpool get the money to pay for it all?
In the first instance, the club remains a strong cash generator, recording inflows from operations (ie, before any of the transfer or capital spending) of £83.7m. That’s good, albeit also a sign of the lack of Champions League football biting. Other than the Covid-19-hit 2020-21 season, that was Liverpool’s lowest cash generation from operations since 2017, with each of the rest of the ‘Big Six’ (other than City, who don’t publish a cash flow statement) topping £100m in their most recent accounts.
While good, that amount alongside the low existing cash balance plainly wasn’t enough to fund transfer costs, never mind completing the works at Anfield and the Melwood buyback. The money required instead came via a £127.3m loan from FSG, the first time the owners have provided cash funding since 2016, and a sum which pretty much doubled their total funding of the club since taking over. In all, FSG provided Liverpool with cash funding of £263.6m. Combined with the initial purchase cost, their total outlay sits at £494.0m.
Things aren’t quite that simple. While last season’s £127.3m loan did come into the club via FSG, the cash itself arose through a deal completed in September 2023, whereby Dynasty Equity bought up a small stake in FSG. The proceeds from the sale were then recycled into Liverpool. The size of the stake sold to Dynasty was unspecified but believed to be in the region of three per cent. Dynasty didn’t buy shares directly in the club, and it’s unclear which entity they did acquire shares of. It would make sense though if that entity were FSG Football, LLC, given the only real asset in that company’s downstream is the club (whereas the wider FSG entity owns, for example, Major League Baseball’s Boston Red Sox).
The transaction was announced as a ‘equity minority investment in Liverpool F.C.’ at the time and, since no shares in the club have changed hands, this statement makes more sense if Dynasty bought into the parent company that only oversees the football side of things. Assuming they did, their investment values FSG’s football arm at a cool £4.24bn, or over 18 times what Liverpool were bought for back in 2010.
Separately, the same announcement placed paying down bank debt first in the list of what the funds would be used for, yet the club’s bank debt only fell by £9.8m last season. The majority of the cash influx instead went on the final costs of extending the Anfield Road End and meeting those significant transfer payments.
FSG has now injected over £250m into Liverpool during its tenure (even if half of it came via a share sale, so could be argued wasn’t initially its own money), but plenty of fans have long wondered about the group’s strategy when it comes to funding their club. Set alongside the huge sums poured into rivals over the years, FSG’s executives have sometimes been viewed as penny-pinchers, not least during recent contract negotiations with Mohamed Salah.
Liverpool are one of the Premier League’s bigger spenders on wages but are still to secure the futures of three key players (Photo: Carl Recine/Getty Images)
Whether that’s a fair view of Liverpool’s owners is hard to say. On the one hand, their inputs pale compared to Manchester City and Chelsea, both of whom have benefited from over £800m in owner funding since FSG arrived 14 and a half years ago. On the other, the group rescued Liverpool from an incredibly grim situation, turning fortunes around both on and off the pitch. The only club in recent years to consistently better Liverpool has been City who have far deeper reserves to draw on whenever needed.
Liverpool fans might ask if Klopp would have had more than one Premier League title to show for his nine years in charge if only that £350m squad cost gap had been narrowed, and maybe he would have, but it’s not like Liverpool have been skinflints; as we’ve seen, they’re the second-highest wage payers in England. In the transfer market, they’ve more often than not been savvy, assembling a world-class squad for less than anyone else managed.
FSG haven’t been flawless by any stretch. But it’s difficult not to wonder if they might be more appreciated if football weren’t a sport that, for myriad reasons, often views spending money as worthy of praise in and of itself, regardless of whether that spending turns up the desired results.
What’s next?
Back in the Champions League and with the biggest slice of the Premier League prize pot within their grasp, Liverpool will break another club record for revenue this season. They should top £700m in income in 2024-25, a barrier only previously broken by Manchester City on the domestic front.
That, combined with minimal, if any, wage and amortisation growth, as well as improved player profits and an uptick in matchday income now the extended Anfield Road End is operational for a full season, will see Liverpool return to overall profitability. Predicting a club’s bottom line is fraught with danger, but The Athletic’s estimate suggests Liverpool’s pre-tax profit this season could hit the £40m-50m mark. The big unknown is where the wage bill will land this season. Even if it reaches £400m, Liverpool could still clear £30m profit.
Trying to figure out Liverpool’s PSR headroom for next season is even trickier, given it involves combining estimates of the deductions for previous years with those 2024-25 profit projections. Even so, all of it points to one conclusion: they have plenty of scope under PSR to spend this summer, whether it’s on extending the contracts of Salah, Alexander-Arnold, Virgil Van Dijk and Ibrahima Konate (who has only a year left to run on his existing deal), or on snaffling Alexander Isak from Newcastle, even with the latter’s reported £150m asking price.
Of course, PSR headroom and the actual ability to spend real money are completely different things. Do Liverpool have the cash to spend? On the face of it, they should do. The club has, at least in a relative sense, low outstanding debts on transfers, and should see operating cash flows leap now they’re back in the Champions League. Capital expenditure will drop now numerous big projects are complete, so there will be cash to use. That being said, moving for someone like Isak would be contingent on raising further funds through the sale of Darwin Núñez, with Liverpool highly unlikely to sanction a big money striker signing without first moving a fellow forward off the books.
How much of that gets spent on new transfers may depend on FSG’s approach to the debt. Its decision-makers are known to be keen to reduce Liverpool’s bank debt (£115.6m at the end of last May), not least because it will reduce the £8.7m in interest paid last year. Whether they look to recoup some of the interest-free £198.7m owed to themselves is another matter.
Trying to predict how much Liverpool will spend is impossible but it’s evident they have scope to invest in the squad if they choose to. Financially, FSG has got the club on track, even with last year’s blip. On the pitch, for much of this season, Slot’s men looked near unbeatable but the aura has faded in recent weeks. Slot has done a sterling job with tools that were already in place. This summer would be a good time to equip him with some new ones.
(Top image: Eamonn Dalton for The Athletic, images: Getty Images)
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