UK labour market continues to shine despite the bleak Brexit backdrop

March 19, 2019

Despite the unemployment rate hitting a 44-year low, and wages continuing to outstrip expectation, today’s release hints at a faltering labour market in the months to come.

UK labour market continues to shine despite the bleak Brexit backdrop but may start to show signs of faltering.

Sterling rallied briefly as the ONS data was released prematurely and signalled that the UK labour market remains resistant to Brexit uncertainty, for now. Wages continued to grow at a steady pace, despite the expected slowdown in the new year. The release bodes well for the Bank of England who previously calmed investors nerves of a rate cut by pointing to the record tight labour market propping up growth and inflation.

Despite today’s positive economic data being overshadowed by events in Westminster, the release may ultimately give Carney more fodder to stave off Brexit related questions on Thursday’s Bank of England meeting.

However, a slump in the labour market’s progress may be on the horizon. Job-to-job flows in the fourth quarter of 2018 dipped off from the post-recession high in Q3, hinting that the average worker’s confidence to change jobs to seek a higher wage took a hit. Although this is only one data release, the theme is consistent with consumers spending pivoting away from non-essential to essential items in the first few months of 2019, hinting that Brexit is starting to take its toll. This could signal to a downturn in UK GDP for the coming months.

Chart 1: Job-to-Job flows falls from post-recession high

Source: Data ONS/ Monex Europe

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