Labour market data will be watched out of the United Kingdom on Tuesday just as Parliament is suspended again only a week after returning from the summer recess. The employment report, due at 08:30 GMT, comes after today’s data pointed to a small bounce in UK growth in July. But while any upbeat data is supportive of the pound, traders will be looking for progress on the political and Brexit front before adjusting their long-term outlook for the currency.
UK employment and wages are still rising
While the protracted Brexit uncertainty has started to leave traces of damage on the British economy, the labour market has remained robust with few signs that the pace of hiring by employers is slowing. That picture likely held true in the three months to July as the unemployment rate is expected to have stayed at a near 44-year low of 3.9%. Employment is forecast to have increased by 43k during the three-month period, easing from 115k in the prior three months. Perhaps more crucially for the economy where consumption accounts for about two-thirds of GDP, wages are expected to have advanced by 3.7% year-on-year, unchanged from the April-June period when it hit an 11-year high. Excluding bonuses, the figure is anticipated slightly higher at 3.8% y/y.
If wages continue to grow at a healthy level, UK shoppers will probably keep on supporting the economy as business investment dries up amidst the darkening cloud of Brexit. However, there are doubts as to how long the broader services sector will remain resilient to the unfolding Brexit crisis. Growth in services has been anaemic so far this year and only picked up markedly in July, suggesting domestic consumption alone may not be enough to keep retailers and other service-sector businesses from shelving their investment plans.
July rebound may be temporary as Brexit turmoil rages on
Data out today showed GDP growth picking up to 0.3% on a monthly basis in July, easing the chances of the economy slipping into a technical recession in the third quarter. However, with the political turmoil in Westminster not looking to be abating anytime soon, the British economy may not be out of the woods just yet.
Prime Minister Boris Johnson is expected to have a second go later today at triggering a general election, but opposition parties are intent on denying Johnson his bid for a snap vote until an extension to the Brexit deadline has been formally requested from