Market Report - 11/06/2024
UK Unemployment rises
The Office for National Statistics have reported this morning that the UK unemployment rate has risen to 4.4% from February to April, taking the total number to just over 1.5 million, meaning the unemployment rate is now at its highest level since the July to September period in 2021.
The number of people in work has fallen by 139k, taking the total number to 32.97 million, while a further 132k more people fell out of work altogether, partly due to ill health.
The data shows that the labour market is not where Prime minister Rishi Sunak would like it be before an upcoming election, with companies also cutting back on hiring – the number of vacancies in March to May this year have fallen by 12k to 904k. Despite this, wage growth has not slowed and the ONS reports that even with the labour market “cooling” the annual growth in regular earnings (excluding bonuses) was 6.0% for the last 3-month period, meanwhile the annual growth (including bonuses) was 5.9%.
Prime minister and election aside, the data will also be watched closely at the Bank of England as central bankers are looking for evidence that inflationary pressures are easing. With wage growth stubbornly high, hopes of an early rate cut could be curbed for now – all eyes will be on CPI data and B.O.E Thursday next week.
Following the UK's announcement of further job losses and rising unemployment in its most recent labour market numbers, GBP declined vs most of its major pairs, including the EUR and USD. Losses could be constrained though, by the stubbornly high wage-growth and the importance of the inflation data that comes out next week.
In the minutes following the ONS's announcement that the UK unemployment rate increased, the pound fell to a daily low of 1.1807 from 1.1848 which was the 34-month high noted yesterday afternoon. The large swing was due to the forecast for UK unemployment being 4.3%, so when the actual reading overshot this expectation, markets were reacting to a slight shock which often causes some volatility.
Also news that average earnings with bonuses included rose in April, at a faster rate than forecast (5.7% expected by the consensus). Pay rose 6.0%, in line with estimates when bonuses are not included. As a result, these pay rates are not consistent with the Bank of England's mandate of bringing inflation back to 2.0% on a sustained basis.
A busy start to the week is also followed by an action packed second half of the week on a macro-economic basis. Please see the key risk events below which investors will be watching closely below:
Wednesday 7am – Germany CPI data
Wednesday 7am – UK GDP data
Wednesday 7am – UK Industrial Production Data
Wednesday 1:30pm – US CPI data
Wednesday 7pm – FOMC Rate Decision
Thursday 1:30pm – US Labour Market Statistics
Friday 10am – 2:30pm – ECB policy makers speaking
Friday 3pm – US Consumer Sentiment data