13 May 2015
UK labour market offers more reasons for optimism – ING
FXStreet (Barcelona) - Reviewing the UK labour market data release, James Knightley, Senior Economist at ING, notes that the pick-up in average earnings and fall in unemployment reading paints a stronger picture for GDP growth.
Key Quotes
“Today’s Labour market numbers from the UK look pretty good. 202,000 jobs have been created over the past three months, while the number of people classifying themselves as unemployed has fallen 35,000. This has pushed the unemployment rate down to 5.5% from 5.6 - the lowest reading for unemployment since July 2008.”
“Also, significantly, we have seen a decent pick-up in average earnings. Excluding bonuses, pay is now rising 2.2%YoY (versus 1.9% previously). This is the fastest rate in just over four years while including bonuses pay is rising 1.9%.”
“Given inflation is at zero and that the tax free personal allowance has just been increased, households should be starting to sense that they have more money in their pockets. This should be good news for confidence and spending and lead to stronger GDP readings after the disappointing 1Q15 growth rate of 0.3%QoQ.”
“Attention now switches to the Bank of England’s Inflation Report and press conference. Given the minutes to the April MPC decision suggested the BoE were somewhat surprised by the “exceptionally flat” market interest rate expectations, today’s report offers scope for a slightly more hawkish tone from the central bank. Nonetheless, sterling’s recent strong run may make them cautious on being too aggressive on this.”
Key Quotes
“Today’s Labour market numbers from the UK look pretty good. 202,000 jobs have been created over the past three months, while the number of people classifying themselves as unemployed has fallen 35,000. This has pushed the unemployment rate down to 5.5% from 5.6 - the lowest reading for unemployment since July 2008.”
“Also, significantly, we have seen a decent pick-up in average earnings. Excluding bonuses, pay is now rising 2.2%YoY (versus 1.9% previously). This is the fastest rate in just over four years while including bonuses pay is rising 1.9%.”
“Given inflation is at zero and that the tax free personal allowance has just been increased, households should be starting to sense that they have more money in their pockets. This should be good news for confidence and spending and lead to stronger GDP readings after the disappointing 1Q15 growth rate of 0.3%QoQ.”
“Attention now switches to the Bank of England’s Inflation Report and press conference. Given the minutes to the April MPC decision suggested the BoE were somewhat surprised by the “exceptionally flat” market interest rate expectations, today’s report offers scope for a slightly more hawkish tone from the central bank. Nonetheless, sterling’s recent strong run may make them cautious on being too aggressive on this.”