Wage Growth Rebounds
After dipping down to 2.4% in the three months to June, UK wage growth rebounded over the three months to July printing 2.6% (520 GBP per week) and beating expectations of a 2.5% reading. The ex-bonus reading was similarly strong printing 2.9% (489 GBP per week) from a prior 2.7% and beating expectations of a 2.8% reading.
The break-down of the data shows that pay increases were broad-based with public and private sector pay rising 2.4% and 2.6% respectively. Pay increases were also seen in the services sector which rose 2.5% with wholesaling, retailing, hotels and restaurants rising 3.6%.
However, wages in manufacturing rose less than expected at 2.3% vs 2.6% with a similar shortfall seen in construction which rose 4.5% vs 5.3%.
Data Supports BoE View
The release will be welcomed by the BoE as it encourages the bank’s view that tightness in the labor market is finally starting to create bargaining power for workers and is fuelling inflationary pressure.
Unemployment Rate Remains at 1975 Levels
Alongside positive wage growth data, the latest ONS release shows the UK unemployment rate has remained at 4% in the three months to July, its lowest level since 1975. The number of unemployed persons in the UK fell by a further 55k over the measured period while the number of people in work remained unchanged at 32.4 million.
The stagnation in jobs growth further supports the BoE’s view that labor market tightness is fuelling inflationary pressure with the labor market near full capacity. However, some argue that companies are simply putting activity on hold until there is a clearer view of Brexit.
After months of heavy selling, GBPUSD has seen five consecutive weeks of buying in the latest period with the price now once again testing resistance at the 1.3045 level which was a broken prior support level. Above here and focus will be on a retest of the broken bullish trend line from 2016 lows ahead of a test of structural resistance at the 1.37 level. If price turns lower once again, however, the focus will be on the band of support between 1.2578 – 1.27.