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UK employment drops

Image source: Hurst Photo, Jr images - Shutterstock

What's going on?

As business owners wait to see if Britain will punch out of the European Union (EU), fresh data on Tuesday revealed employment in the UK unexpectedly fell – by the most in four years – between June and August.

What does this mean?

There were 56,000 fewer people in work between June and August than between May and July, when it had increased by 31,000 – suggesting a steep drop in August. That was partly down to a fall in part-time work, which (third-quarter recession or not) is often the first to be cut when tensions are high.

The unemployment rate, in turn, lifted from its lowest level in over 40 years. Higher availability of workers could yet slow future wage growth, though it appears so far to have grown at the same rate as the three months to July. Still, there was good news for Brits: their money went further if they headed abroad…

Why should I care?

For markets: Arise, pound sterling.
Despite Tuesday’s weaker-than-expected jobs update, the value of the British pound rose by 1% compared to the US dollar and the euro – hitting a five-month high versus the latter. The currency’s fire was stoked by reports of progress toward a new Brexit agreement between the UK and the EU. Investors buying up British assets probably expect the potential certainty around the UK’s future relationship with the EU to push consumer and business spending up – and economic growth to boot.

The bigger picture: A better mood in Europe too.
Survey results on Tuesday showed German financial market experts’ outlook for the country’s economy fell slightly this month compared to last – but not by as much as economists had predicted. Recent data has underscored that parts of the German economy aren’t as bad as perhaps feared, and – coupled with a US-China handshake on trade – might be the glimmer of light at the end of Germany’s recent economic tunnel.

Originally posted as part of the Finimize daily email.

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