First of all, what is the U.K. claimant count change report?
Basically, the report measures the change in the number of British citizens who filed for unemployment benefits during the previous month. A negative figure is a taken as a good sign, as it means that less people filed for benefits, while a positive figure is a bad sign, as it indicates that more people are making claims.
Last Wednesday, we got a pleasant surprise from the U.K. labor market, as the claimant count change report printed a figure of -29,200. This meant that the number of people who filed for unemployment benefits fell by 29,200 over the past month. What made this such great news is that it was more than double the anticipated 13,000 drop.
Moreover, this brought the claimant count rate down to 4.3%, its lowest level since early 2009, while the -29,200 figure marked the largest fall in month-on-month claims since May 2010. This adds to the notion the British economy is improving and should continue to gain steam over the remainder of the year.
In turn, we saw a nice bump up in GBP/USD last Wednesday.
Even though the improvement in U.K.’s job market is good news, you have to keep in mind that last week, the BOE announced that one of its mandates that will govern monetary policy is the unemployment rate.
In fact, the BOE specifically stated that it will not even consider making changes to interest rates unless the unemployment rate falls to 7.0%. The central bank does not expect this to happen until the middle of 2016.
So, despite the optimistic jobless claims report, remember that the longer-term picture shows a frail U.K. economy. For now it would be prudent to not get overly excited and keep your expectations in check.