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UK Unemployment Rate ticks up to 5.1% in the quarter to October, as expected

The United Kingdom’s (UK) ILO Unemployment Rate rose to 5.1% in the three months to October after reporting 5% in the quarter to September, data published by the Office for National Statistics (ONS) showed on Tuesday.

The data came in above the market forecast of 5.1%.

Additional details of the report showed that the number of people claiming jobless benefits climbed by 20.1K in November, compared with a revised decline of 3.9K in October and the expected 22.3K gain.

The Employment Change data came in at -17K in October, against -22K recorded in September.

Meanwhile, Average Earnings, excluding Bonus, in the UK ticked up by 4.6% three months year-over-year (3M YoY) in October versus a revised 4.7% growth booked previously. The market expectation was for a 4.5% print.

Another measure of wage inflation, Average Earnings, including Bonus, advanced by 4.7% in the same period after increasing by 4.9% (revision) in the quarter through September. The data beat the estimate of 4.4%.

GBP/USD reaction to the UK employment report

GBP/USD stays uninspired by the release of the UK employment data. The pair is trading modestly flat on the day at 1.3370, as of writing.

Pound Sterling Price Today

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the Japanese Yen.

USDEURGBPJPYCADAUDNZDCHF
USD0.03%0.05%-0.22%-0.01%-0.03%-0.02%0.03%
EUR-0.03%0.02%-0.22%-0.04%-0.06%-0.05%0.00%
GBP-0.05%-0.02%-0.25%-0.07%-0.08%-0.07%-0.02%
JPY0.22%0.22%0.25%0.19%0.17%0.17%0.24%
CAD0.01%0.04%0.07%-0.19%-0.02%-0.00%0.05%
AUD0.03%0.06%0.08%-0.17%0.02%0.01%0.06%
NZD0.02%0.05%0.07%-0.17%0.00%-0.01%0.05%
CHF-0.03%-0.00%0.02%-0.24%-0.05%-0.06%-0.05%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).


The section below was published at 04:47 GMT as a preview of the UK labor market report.

UK labor market report overview

The UK Office for National Statistics (ONS) will publish its labor market report at 07.00 GMT. The UK ILO Unemployment Rate is expected to rise to 5.1% in October from 5.0% in September. Employment Change arrived at -22K in September.

The UK Claimant Count Change for November is projected to increase by 22.3K, reflecting the number of people claiming jobless benefits. The reading was 29K in October. Meanwhile, the Claimant Count Rate was at 4.4% in the previous month.

Meanwhile, UK Average Earnings, including bonuses, in the three months to October, are estimated to accelerate by 4.4%, following 4.8% prior, while ex-bonuses, the wages are forecast to rise by 4.5% against the previous 4.6%.

How could the UK labor market report affect GBP/USD?

GBP/USD trades in negative territory on the day in the lead up to the UK labor market data. The pair loses ground as traders turn cautious ahead of the key US economic data, including Nonfarm Payrolls (NFP), Retail Sales, and Purchasing Managers Index (PMI), which will be released later on Tuesday.

If data comes in better than expected, it could lift the Pound Sterling (GBP), with the first upside barrier seen at the 1.3400 psychological level. The next resistance level emerges at the December 11 high of 1.3438, en route to the October 17 high of 1.3471.

To the downside, the 100-day Exponential Moving Average (EMA) of 1.3330 will offer some comfort to buyers. Extended losses could see a drop to the December 9 low of 1.3287. The next contention level is located at the December 3 low of 1.3202.

Employment FAQs

Labor market conditions are a key element to assess the health of an economy and thus a key driver for currency valuation. High employment, or low unemployment, has positive implications for consumer spending and thus economic growth, boosting the value of the local currency. Moreover, a very tight labor market – a situation in which there is a shortage of workers to fill open positions – can also have implications on inflation levels and thus monetary policy as low labor supply and high demand leads to higher wages.

The pace at which salaries are growing in an economy is key for policymakers. High wage growth means that households have more money to spend, usually leading to price increases in consumer goods. In contrast to more volatile sources of inflation such as energy prices, wage growth is seen as a key component of underlying and persisting inflation as salary increases are unlikely to be undone. Central banks around the world pay close attention to wage growth data when deciding on monetary policy.

The weight that each central bank assigns to labor market conditions depends on its objectives. Some central banks explicitly have mandates related to the labor market beyond controlling inflation levels. The US Federal Reserve (Fed), for example, has the dual mandate of promoting maximum employment and stable prices. Meanwhile, the European Central Bank’s (ECB) sole mandate is to keep inflation under control. Still, and despite whatever mandates they have, labor market conditions are an important factor for policymakers given its significance as a gauge of the health of the economy and their direct relationship to inflation.

Author

Lallalit Srijandorn

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

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