FTSE reacts mildly as we receive reasonable UK job data

Wages jump, unemployment falls and sterling modestly upticks.

Article updated: 11 September 2018 9:00am Author: Helal Miah

  • UK unemployment revealed to be at its lowest since 1975
  • The figures reflect improvement as also suggested by recent GDP figures
  • The wage growth should get a good airing at the BoE’s policy meeting on Thursday but little chance of a rate hike.

This morning we have had a reasonably good set of jobs numbers out of the UK backing up the evidence that economic growth in the UK in recent months has been good. While only 2700 new jobs were created during July versus the expectations of roughly 20,000 and the claimant count for August was marginally higher than consensus, the unemployment rate held steady at a lowly 4.0%.

More importantly, the rate of wage growth which has been relatively low given the level of unemployment showed an improvement. Average weekly earnings grew by 2.9% during July, beating both the previous month’s 2.7% and economist estimates of 2.8%. When considering bonuses, this too beat the previous months figure and estimates.

The result was a small uptick in sterling but more importantly this set of results back some other pieces of economic data suggesting the economic growth has been relatively sound in the last two quarters following a weak first quarter. This data backs up yesterday’s month GDP figures which were supported by the great weather and the football World Cup as well as data out of the services sectors which remain strong.

The data also highlights the widening gap between inflation and earnings which should be welcomed. This will almost certainly get a strong airing at the Bank of England’s interest rate meeting later this week but should have little overall impact on the actual decision, its highly likely still that rates will be kept at 0.75% and policy makers will want to take a wait and see approach after the last rate hike in August. This is despite ongoing uncertainty around Brexit and former policy makers such as Andrew Sentence already asking for rate to be at 1%.

Overall, these results should also have little impact on the equity market, which only reacted very mildly to sterling appreciating. For equity investors we still believe its “steady as you go” and this asset class still represent the most attractive risk return profile in a still low interest rate environment.

Helal Miah portrait photo
Helal Miah

Investment Research Analyst

After graduating with an economics degree from University College London, Helal started his career within private banking at Smith & Williamson Investment Management and later held analyst and fund manager roles with the Industrial Bank of Japan, Schroders and Mitsubishi Corporation. He is a chartered fellow of the Chartered Institute for Securities & Investment. 

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