If you thought the U.K. couldn’t possibly keep up its stellar streak of employment gains, think again! Their January jobs report posted yet another upside surprise, which might be enough to keep the pound supported against its forex counterparts.
1. Four consecutive months of stronger-than-expected data
As though the larger than expected 38.6K reduction in claimants wasn’t impressive enough, the U.K. even printed revisions for the previous month’s report, showing a 35.8K decline in joblessness from the initially reported 29.7K drop. If you’d scroll back further to earlier releases, you’ll see that the U.K. has been churning out stronger-than-expected claimant count change figures AND seeing upward revisions for the past four months!
2. Unemployment rate down to its 6-year low
With these consecutive hiring gains, the U.K. economy managed to bring its jobless rate down from 5.8% to a 6-year low of 5.7% in January. Other labor indicators also reached record levels, with the employment rate surging to 73.2% – its highest level since records began in 1971.
Underlying components also showed improvements across the board, confirming that the labor sector is indeed strengthening. Better quality jobs were being created, as full-time jobs accounted for most of the hiring gains, while the measure of underemployment declined.
3. Wage growth outpaced inflation again
Weak wage inflation has been a major concern for the U.K. economy last year, but the latest jobs release suggests that they’ve got nothing to worry about for now. Average hourly earnings climbed from an upgraded 1.8% reading to 2.1%, higher than the projected 1.7% figure.
This places wage growth significantly above the current annual CPI, which stood at 0.5% in December then tumbled to 0.3% in January. In fact, wage inflation has been outpacing consumer inflation for the past four months! Because of that, consumers can confidently increase their spending and take advantage of the drop in price levels.
If there’s any key takeaway from this upbeat jobs release, it’s that BOE Governor Carney makes a solid point in saying that the U.K. economy can survive the downturn in inflation and even emerge with stronger spending figures. Heck, if this positive hiring streak is sustained, forex market participants might start buying into the idea that the BOE’s next move might be a rate hike! Do you think this is a strong possibility?