While the UK labour statistics do not carry with them the same level of market anticipation as the US non-farm payroll statistics, which have the potential to create large market movements, they do act as a perceived litmus test for the health of the UK economy.
“UK employment has been struggling somewhat in the last few months as the overall economy has been flatlining for the past year,” says Angus Campbell, head of sales for Capital CFDs. “Although recent data from the PMI services and manufacturing surprised to the upside last week, and a small bounce in service sector employment is expected, the trend for employment is very much downwards at the moment.”
According to Will Hedden, sales trader for IG Markets, industry rumblings also point to disappointing figures: “It isn’t a surprise to see such a negative view when you also see the cautious rhetoric that we have been hearing from the major recruiters.” Hedden adds: “Wednesday’s data is currently being forecast as an improvement, but if you consider that we are hearing much more about job losses than job creation in the news, the possibility of disappointment in the headline rate of unemployment is high.”
TROUBLE ACROSS CHANNEL
It would not be an article in a financial newspaper without a warning of the effects of the Eurozone’s economic troubles. According to Jordan Lambert, a trader with Spreadex: “Both Germany’s and France’s recent stagnant growth could be putting more strain on the UK unemployment situation as they are two of its biggest trading partners.” And despite Merkozy’s public rhetoric that all is well, there seems to be little sign of any upturn in European demand. Traders should keep a close eye on the ONS figures and look to jump on any shock figures.