Unemployment Down, Calm Before The Storm?

Jobless data released yesterday in the UK was the first piece of good news in a while, with unemployment falling by 34,000 in the three months to May. Those seeking jobseekers allowance also fell to 1.46m. This does suggest that the labour market might be stabilising, which made sterling rise to a two month high against dollar, however many analysts are saying that this could just be the a brief interlude before public sector job losses over the winter period. David Cameron is struggling to appoint a new trade minister, two business leaders have already turned down the job and it has been vacant for over two months – with this being the only non-salaried job in government it is no surprise that candidates aren’t coming out of the woodwork.

The Italian Senate is meeting today to approve the centre-right government’s €25billion austerity package, Berlusconi is planning a vote of confidence despite disagreement from his own coalition. The package is extremely unpopular, and it doesn’t help that the Italian government have to handle several corruption scandals at the same time. The proposed cuts are not as bad as Greece, Ireland or Spain as they have a relatively contained budget but the payments on the austerity package are likely to come from a crackdown on tax evasion, a wage freeze in the public sector and mainly local and regional governments. Zapatero, Spain’s socialist prime minister urged his country to endure the austerity imposed by his government for the country’s sake, however his inability to give gravity to the situation last year led to the expectations that Spain would need to be bailed out like Greece.

The US released another weak retail rales report yesterday, which has added fuel to the fear of a US double-dip recession. This was the second consecutive month of declines, apart from with core retail with increased by 0.2%, and the news has created downward sentiment with people being less keen on the sell-side. The Fed’s meeting yesterday saw the 2010 growth forecast cut for the first time since the beginning of the economic recovery as the Central bank discuss easing policy rather than tightening it. The basic outlook is still for growth but it does show that the federal committee are worried by the weak data which has come out recently.

Today is a big day for data coming from the US, but before that deluge begins there is the ECB Monthly Report at 9am which might shed some light on what is going on within the euro zone. Then comes the US minefield which includes Jobless claims, PMI and Industrial Production. Needless to say this could continue the surprises we have seen over the past few days.

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