News & analysis

  • UK labour market report generally better than expected.
  • Average Weekly Earnings grew 3.2% 3m/YOY vs 3.1% expectation and 3.2% previous.
  • Unemployment 3.8%.
  • Employment rose 208,000 in the three months ended November, almost double expectations

The UK data picture is exceptionally murky currently, and today’s jobs figures only complicate things further.

Last week saw expectations of rate cuts from the Bank of England soar after a weak GDP print, poor retail sales, and dovish comments from MPC members.

Judging by this morning’s UK data, the UK labour market remains more robust than these other lagged economic indicators would suggest.

Sterling is trading higher on the release, as market participants are beginning to pare back assumptions that a rate from the MPC is a done deal next week.

Although business surveys and hard output data pointed towards a serious slowdown in Q4, there is an argument to say that households are in good shape.

Last week’s poor retail sales data may have been affected by seasonal factors, and today’s jobs figures show real wages rising and the economy adding jobs in the three months to November.

Given households are enjoying real wage gains and the labour market remains robust for now, there is a strong case for viewing the Q4 slowdown as a speed bump.

Next week’s MPC meeting is shaping up to be a perfect litmus test of policy makers’ biases. Lagged output and retail sales data suggest the economy underwent a nasty slowdown that may merit rate cuts in Q4.

This morning’s labour market data suggests that employment held up, as did wage growth, at least through to November. As a result, both the doves and the hawks will have plenty of evidence to confirm any prior beliefs.

Friday’s purchasing managers indices releases will have a huge impact for both the MPC and for sterling, which is finally again trading on fundamental data and monetary policy expectations, as opposed to the latest Brexit headline.


Author: Ranko Berich, Head of Market Analysis at Monex Europe.



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