UK Employment Figures Miss

Chris Lewis
Chris Lewis

15 October 2019

Row of UK flags

  • Claimant count higher in September
  • Unemployment rising
  • Brexit uncertainty

As with all things involving the United Kingdom currently, there is now quite a bit of scrutiny placed on the employment figures. After all, there are a lot of concerns about specific industries leaving London in the midst of Brexit. With that in mind, one would be wise to pay close attention to the employment figures, as these offer a forward-looking indicator as to how the economy may be faring.

there are a lot of concerns about specific industries leaving London in the midst of Brexit

The numbers

The various numbers released during the trading session on Tuesday were a mixed bag. Overall, they did miss, and that will weigh upon the UK economy and, by extension, the British pound and the FTSE. During the session, the September claimant count change was 21,100 as opposed to 16,300 for the month of August. That being said, it was just slightly worse than anticipated. In fact, it is within the statistical range of error.

The unemployment rate did rise in the United Kingdom, coming out at 3.9% as opposed to the expected 3.8%, which would have mirrored the previous month. This is more concerning as it could suggest that some layoffs are beginning to happen. This could possibly be in relation to Brexit, or perhaps it is just simply related to the overall business confidence that seems to be slumping in the United Kingdom.

Financial footing will be slippery

The biggest issue with employment figures, and other indicators for that matter, will be that nobody truly knows what the Brexit deal is going to look like, or even if there will be one. Granted, lately we have seen more consolatory tones coming out of both London and the EU. But meanwhile, nothing has been settled. As long as that’s going to be the case, it’s very likely that a lot of skittish nerves will still be out there trying to absorb the pressure.

Even though the British pound could very well shoot higher at the announcement of a deal, the real question will be whether or not that deal is in the interest of the United Kingdom, the European Union, or both.

It is likely that the British economy will suffer after leaving the European Union, albeit temporarily. With this in mind, one would have to assume that British stocks will probably have another leg lower before it’s all said and done, although the British pound might be a bit of an outlier.

It is times like these that historically produce outsized returns, as assets suddenly become “cheap”. The British economy will sustain itself longer-term, especially as the European Union looks almost certain to head into a recession. Money will have to flow somewhere, and it’s not going to take a lot of imagination for it to go looking across the English Channel again.

Overall, it looks like it’s short-term pain, but more than likely long-term gain for the British economy. Once the noise settles, things will more than likely look up. In the meantime, there’s a slippery slope to climb.

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