The most recent report on UK employment follows yesterday’s data on consumer prices in the territory, with both measurements doing nothing to assuage worries about inflation’s distance from its 2.00% target. Stubborn consumer prices combined with today’s report of unemployment floating still at 5.10% illustrate the issues facing policymakers, as the labour sector is an extremely influential driver of economic growth in the United Kingdom. With progress on fundamentals grinding to a halt, officials hesitant to complicate the situation with further policy are forced to sit back and observe while metrics like unemployment miss expectations, in this case of a decline to 5.00%. Data released in recent sessions has even been coming in under pessimistically adjusted trend lines, as evidenced by this last unemployment measurement and also by wage growth including bonuses, which fell to 1.90% after last month’s 2.10%.
The United Kingdom is in a difficult position, as the latest reports seem to prove that without intervention by the Central Bank they will continue to announce decline, even as the Bank itself states at the same time not to expect rate adjustments due to the risk of deflation. If fundamentals were improving, perhaps the notion of naturally aspirated inflation could work, but the opposite means that consumers with lower wages see declining prices as an opportunity not to buy, holding back progress on prices gains even further. The dilemma has seen the Pound act logically – as rate hikes are postponed the currency dips further against peers like the US dollar. GBP/USD took a slight upward bounce off of established lows, but the strong downtrend and the mediocre CPI report soon applied pressure that had the pair return to a slow decline, trending back towards the key 1.4000 threshold.