UK Employment Disappoints

Alan Penny

12 November 2019

3 min read

United Kingdom flag

  • Claimant Count Change released worse than anticipated
  • Average Earnings Index misses
  • Unemployment rate slightly better

The UK economy is currently teetering on recession, mainly because of the uncertainty that surrounds Brexit. However, there are signs that the Bank of England may step in and do something.

The most recent Monetary Policy Committee meeting had seen a pair of members call for interest rate cuts, something that was not anticipated. Perhaps they were paying attention to employment when they came up with that decision?

Employment is crucial because if the populace isn’t working or making money, there isn’t much they can do to lift the economy. Employment also is huge when it comes to central bank policy. At this point, it looks as if the Bank of England is certainly going to have to be very cautious, as the Brexit scenario continues to be muddy at best.

The numbers

The economic numbers were quite miserable, as the Average Earnings Index came in at 3.6%, 3m/year. The Claimant Count Change came in at 33,000, meaning that 33,000 citizens in the United Kingdom applied for unemployment benefits much higher than the anticipated 24,200.

That is an ugly sign, as it means the economy may be struggling more than people predicted. Ultimately, this is an economy that is paralyzed by fear and uncertainty. And as Brexit drags on, it will only get worse.

if people stop looking for work, they are no longer “unemployed”

The Unemployment Rate was slightly better than anticipated, but this could be a bit misleading. After all, if people stop looking for work, they are no longer “unemployed”. This is something that the Americans drum in during every announcement, and the British aren’t much better. Quite frankly, it looks as if the market is simply “stuck in neutral” until Brexit gets sold.

Recessionary winds

There are recessionary winds out there when it comes to the United Kingdom, but quite frankly, it may not just be the Brexit causing this.

The European Union, Great Britain’s largest trading partner, certainly looks as if it is on the precipice of recession. As the rest of the world has been slowing down, there’s no reason to think that the United Kingdom would be any different. But to simply blame Brexit is to be intellectually lazy. Although Brexit will obviously cause issues, the reality is that it’s not the be-all and end-all.

As we have seen in Germany, the economic numbers are starting to drift lower everywhere. Even the United States is starting to slow down a bit, albeit from a much higher perch than the UK or the EU. Chinese numbers have been a bit soft too.

So, it’s probably unrealistic to think that the United Kingdom would outperform everybody else in this environment, especially with all the political noise going on.

That being said, those who are longer-term value investors have been eyeing the United Kingdom for some time and picking up anything from the British pound to real estate. This should continue to be the case.

Written By
Alan Penny

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