The tax data released today served as a clear sign of a steady recovery in the UK economy as it revealed a significant increase in the number of employed people in July, namely by 182,000 people. This growth in new jobs brings the labor closer to pre-pandemic levels.
According to the UK Office for National Statistics (ONS), the number of vacancies in the country reached a record level of 953,000 between April and June, which is 168,000 more than before the pandemic. Many employers even say that it is becoming more and more difficult to find new employees. Sometimes there is no one to hire.
From now on, around 28.9 million people are employed in the UK. This is only 201,000 less than the usual level that was observed in the UK until March 2020, or before the start of the coronavirus crisis.
Another positive news for the British economy is that the overall unemployment rate in the country fell to 4.7% between March and May. At the same time, most analysts predicted that this indicator would not fall below 4.8%.
It is hard to deny that job subsidies, which paid the wages of 8.9 million workers during the peak of the lockdown last year, have significantly supported the UK labor market. By the end of June this year, these payments were provided to 1.9 million workers. Treasury Secretary Rishi Sunak noted that there are more employees in the UK today than at any time since March 2020, with the number of people on vacation being the lowest since the scheme was launched.
All these promising data once again indicates that the British economy will emerge from the pandemic with less long-term damage than previously predicted.
Based on the labor market report published today, experts at JPMorgan have changed their forecast for the first rate hike by the Bank of England, postponing it by six months until the second quarter of next year. At the same time, many economists are convinced that, despite clear signs of a recovery in the British economy, the Bank of England will not rush to raise interest rates and will wait until 2023.
Meanwhile, the UK regulator officials admit that the current unemployment rate has already reached its peak, so another big jump is very unlikely.
A record increase in wages in the country also adds to the market optimism. Average weekly earnings for the period between April and June rose by 8.8% (up from a year earlier) and are the highest since records began 20 years ago. Notably, people with lower incomes lost their jobs more often than people with much higher incomes.
Despite the encouraging economic performance, the pound remains under pressure. The GBP/USD pair continues to decline. At the time of writing, it was trading at the level of 1.3756. Judging by the current dynamics, we can expect a decline up to the level of 1.3680 along with the negative EMA 50.
The US dollar, on the contrary, is showing a remarkable resilience today, having advanced against most major currencies in the course of the session. According to the CFTC report released a week ago, the demand for the US currency has returned to the levels that were last observed at the peak of coronavirus fears last year. Market participants are seeking more reliable investments and aggressively buying up the US dollar in an attempt to avoid risks. So, the risk aversion strategy seems to set the tone for today.