Largest Decline Since 2009
The British Pound has lost some of its recent upside momentum this week as the latest economic data released today painted a very bleak picture of the employment landscape. While the headline unemployment rate remained unchanged at 3.9%, better than the 4.2% expected, this is well understood to be down to the fact that millions of workers are still on the government’s furlough scheme. However, the number of people falling out of work over the April – June quarter rose by 220,000. This decrease in employment marks the largest landslide in British jobs since the May – July period in 2009. Average hours worked over the quarter also fell by a record amount, decreasing by 5.6 hours to 25.8 hours.
The data, released by the Office for National Statistics revealed that young workers, old workers and those in manual roles were hardest hit during the COVID-19 pandemic. Commenting on the release, Jonathan Arkow, deputy national statistician for the ONS, said: "The groups of people most affected are younger workers, 24 and under, or older workers and those in more routine or less skilled jobs.
"This is concerning, as it's harder for these groups to find a new job or get into a job as easily as other workers."
"Cliff Edge" Fears Mounting
While the current loss of employment has been particularly worrying, there are even greater fears for the employment market outlook as a result of the expiry of the government furlough scheme. With support due to end in October, it is feared that there could be a huge wave of jobs losses due to firms being unable to afford to keep staff on leading to an “employment cliff edge”.
According to publicly available data collected in June, UK firms are currently planning a further 139,000 redundancies across the UK. Over 1,7770 firms, including names such as Airbus, Royal Mail, HSBC and Swissport, have said that they will be looking to lay off more workers.
This data is supported by the latest claimant count data in the UK which shows that a further 94,400 workers claimed unemployment benefits over July. This was well above the less than 10,000 the market was looking for creates further uncertainty over the near-term prospects for the UK economy especially as over 7.5 million people are currently on the government furlough scheme or away from their jobs.
Technical Views
GBPUSD (Bullish above 1.2649)
From a technical perspective. GBPUSD has been trading higher within the bull channel which has framed the recovery. However, the rally has now stalled at a test of the .3191 level resistance, capped by the bearish trend line also. While price remains above the 1.2649 level (where the 50dma is sitting also) the near-term outlook remains bullish with the 1.3516 level the next upside area to watch.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
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