The GBP EUR exchange rate was lower by -0.12% as the latest employment report came in less than expected. Traders were looking for a gain of 125k jobs, but the report came in at 60k. However, the unemployment rate still improved to 4.1%. ZEW economic surveys for Germany came in much better than forecast despite the ongoing restrictions.
The GBP to EUR was trading at 1.1943 and will await the inflation figures this week.
Employment improves but vacancies at record, wages lag inflation
The UK employment figures form the ONS showed a gain of 60k on the month, which was lower than analysts’ expectations for 125k.
Pay for British workers was seen falling in real terms for the first time in a year, despite signs that employers continued hiring in December.
Average wages dropped in November for the first time since July 2020 amid growing concerns over a living standards crisis this year.
The ONS said that earnings grew at 4.2% in November, but the impact from soaring inflation meant workers suffered a 0.9% real-terms cut in their pay packet.
The figures were disappointing for Institute for Employment Studies director Tony Wilson.
“Despite record levels of vacancies and unprecedented demand, employment is unchanged on the figures reported last month while economic inactivity, the measure of those who have left the labour market entirely, appears to be rising,” Wilson said.
“This weak performance is being driven in particular by fewer older people in the labour market, especially fewer older women, and more people out of work due to long-term ill health. With nearly as many vacancies as there are unemployed people, employers are facing the tightest labour market in at least fifty years, with labour shortages now holding back our recovery.”
“As each month passes these issues appear to be getting worse, with the recovery clearly stalling on the eve of the Omicron outbreak. So as we start the new year we need a new ‘Plan for Jobs’ that will raise participation and tackle the recruitment crisis,” he added.
German ZEW sees a big beat to the upside
The German ZEW headline economic sentiment survey for January showed that the index unexpectedly jumped again, to from 29.9 previous while beating estimates of 32.7.
The ZEW commented:
“The majority of financial market experts assume that economic growth will pick up in the coming six months. It is likely that the phase of economic weakness from the fourth quarter of 2021 will soon be overcome.”
“The main reason for this is the assumption that the incidence of covid-19 cases will fall significantly by early summer,” they added.
“The more positive economic expectations include the consumer-related and export-oriented sectors and thus a large part of the German economy.”
Tomorrow sees the latest German inflation report with expectations of a move to 5.3% and the UK will see the release of its core inflation rate also, with a 0.1% dip expected to 3.9%.