Claimant Count Change in the United Kingdom fell much more than expected in June. The UK labour market improvement continues as the economy reopens.
The jobs data is a lagging indicator in any economy. It shows the changes in employment and the economy’s ability to create new jobs.
The COVID-19 pandemic triggered a sharp economic recession around the world. The service-based economy in the United Kingdom contracted, and many employees needed support from the government. As such, the employment data was distorted, as support is still needed at this phase in the pandemic.
For the month of June, the employment situation in the United Kingdom improved drastically. That is particularly true for the Claimant Count Change. The market expected 32.5k fewer claims, but the actual number was 114.8k fewer.
British Pound Unimpressed by Labour Market Data
Despite the better-than-expected data, the British pound was not impressed. The GBP/USD pair, for instance, fell on the news, only to recover sharply from the lows and rally one hundred pips from oversold levels.
One explanation for the confusion is that the unemployment rate ticked higher in June, reaching 4.8% vs. 4.7% expected. However, it is not the first time that jobs data and the unemployment rate diverge, as it can happen from time to time.
Moving forward, investors are curious to see how the UK copes with the shortages in the labour market. When it was a member of the European Union, the country had access to a much larger pool of workers.
The UK was attractive for workers from the European Union because of its strong growth, high wages, and ease of access, to name a few. But the Brexit referendum put an end to that, and so the supply of labour is smaller.
All in all, a solid report from the UK labour market for the month of June. If the trend persists, the economic growth will likely be upgraded in the second half of the year.