Tomorrow we have the release of the latest jobs numbers from the UK, and they are complicated.
Traditionally the ILO Unemployment Rate is what often drives the market, but this time around, that’s likely not to be the case. And then we have to factor in how government policies to deal with COVID-19 influence the behavior of the data, and what the markets might do in response.
The UK is somewhat behind the rest of its peers in terms of how the pandemic evolved. By now, the average number of new cases has started to trend down, allowing the government to start to reverse policies that weigh on the economy.
But it is doing so later than other countries, after having implemented them later than others. This plays into how the data matters for the markets.
Do We Still Care About the Unemployment Rate?
The ILO publishes its unemployment figures with a 45-day delay. This means that the rate we will see published tomorrow is for the three months to March.
For many, that might be old news, since what the market really cares about at this point is how bad the situation is – not how good it was just before most businesses shut down.
Conversely, the Claimant Count is for April, and therefore much more likely to influence the markets.
Weekly data recently has shown a substantial increase in the number of people seeking jobless benefits. The government has implemented a policy aiming to encourage companies to furlough employees rather than fire them. This led to a surprise beat last month, and the market could be looking for better numbers than the situation might suggest.
What We Are Looking For
The consensus among analysts is that there will be a substantial rise in the number of people seeking benefits. However, it will not be enough to surpass the ’08 recession period.
Expectations are for Claimant Count to come in at 100K, compared to 12.1K prior. This would be almost three times the normal rate.
That’s it for the “fresh” data. We can expect the market reaction to be quite muted, even if there is a substantial miss of expectations. The market is already pricing in a substantial loss of jobs, and it wouldn’t come as a surprise.
The Rolling 3 Months
ILO Unemployment is expected to increase substantially, considering that by the end of March, only essential retailers were allowed to remain open.
The consensus is for 4.4% compared to 4.0% prior. The last time it was in that range was early 2018. The expectation is that whatever we get tomorrow, the figure for April is going to be much worse. That forward look is likely to be what drives the market reaction more than the number itself.
3-month average earnings would normally be important for BOE policy. But, at this point, they have much bigger problems to worry about.
However, it might give some insight into what sorts of jobs are being lost. Average earnings ex-bonus are expected at 2.7% compared to 2.9% in the rolling three months ended in February.