When everyone’s focus yesterday was on the European Central Bank (ECB) and its message about the PEPP program, the employment data out of the United Kingdom took the market by surprise.
The Claimant Count Change, which shows the change in the number of people applying for unemployment benefits, declined significantly.
The actual data was better than expected by a mile. The forecast was that over a quarter of a million people applied for unemployment benefits in June, but the actual did not confirm it. In fact, fewer people applied for assistance than those who left the system. The result – minus 28.1k.
What to Make Out of the June 2020 Data?
Like any jobs-related indicator, the Claimant Count Change is viewed as a lagging indicator. However, the labor market is closely related to consumer spending, the engine of economic growth in any economy. No jobs, no money to spend, no economic growth.
Yesterday’s data offers a glimmer of hope for those looking for a V-shape recovery in the United Kingdom. Surely it was affected by companies calling back their employees after the lockdown, so the number does not reflect the ability of the United Kingdom’s economy to create new jobs. What it does reflect is the job market’s resilience in front of the pandemic crisis, as most of the businesses were able to offer a job back to their employees.
The report shows that the rate of decline in the number of jobs slowed in June, an improvement from what happened in the months before. However, vacancies are at their lowest point, and uncertainty about the duration of the pandemic affects businesses and their employees moving forward.
The currency market did not react as many would have expected. The British Pound (GBP) did rise yesterday against most of its peers, but much later than the Claimant Count Change report.
As traders expected the ECB’s decision, the overall FX market moved in tight, correlated ranges. Not even a good report like the one mentioned in this article was not enough for the market to break recent ranges.
It is normal for the market to ignore good or bad news in the middle of summer. Typically, the prices are affected by algorithmic trading and do not move that much as otherwise would be the case.
However, for traders basing their decisions on fundamental data, yesterday’s report shows a remarkable comeback in the UK’s labor market. A positive sign in difficult economic times.