UK unemployment report preview

The UK Prime Minister Theresa May has officially triggered the ‘Brexit’ process on 29th March and today’s unemployment report is the first one since, however, it portrays a time before.  Several economic dockets released recently shows that the UK economy might finally be losing some steam, especially the housing sector.  Yesterday’s inflation report showed that in March, house prices are up by just 5.8 percent from a year ago, which is very weak given the UK’s standard but not necessarily horrible. It is very important to keep on assessing the economic well-being to understand the impact of this ‘first-time ever’ event.

One of the key measures of economic well-being is the unemployment report, which will be released from the United Kingdom today at 8:30 GMT. The reports released so far have shown no devastating impact from the Brexit referendum outcome.  For today, the expectations are similar.

Below is the preview of the report -

• As of now, the unemployment rate in the UK stands at 4.7 percent and median estimate suggests it is likely to remain unchanged.

• So, the major focus will be on earnings growth, since that will be the measure of economic wellbeing.

• Moreover, a positive wage growth should help to downsize the fear of a slowdown in the economy heading towards Brexit negotiations. It will be nice evidence that companies are ready to increase wages even in the face of an exit from the European Union. BoE governor Carney said that the central bank would be monitoring the level of income closely, especially since the referendum aftermath upbeat economic performance was due to consumer spending and credit. Income levels directly affect these two components.

• Recently, there has been some weakness in the economic dockets such as the housing reports and the PMI reports. So, the market participants would be closely watching whether the earnings report reflect the same or not.

• After declining since October 2015 from 2.8 percent, wage growth has dropped to just 1.8 in February last year but recovered since then. Last month, earnings grew by 2.3 percent excluding bonus and by 2.2 percent including it.

• Today earnings growth is expected to be at 2.2 percent including bonus and by 2.1 percent excluding it.

The data release is not likely to have any major impact unless the income growth surpasses 2.7 percent on the upside and or falls below 1.7 percent to the downside.  The pound is currently trading at 1.25 against the dollar, up 0.1 percent for the day so far.