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In a report released by the Office for National Statistics in the UK, the labour data sent mixed messages to investors, as the general unemployment rate continued its 5-year trend of falling as it reached 3.8%, a level not seen since December 1974, according to the Office. However, it was the Average Weekly Earnings Growth that perplexed the market, as the data proves to be somewhat more worrisome than previously anticipated.
For the 3-month period from January to March, it was reported that the total wage growth has markedly increased by 3.2% in nominal terms, which misses the initial market forecasts for 3.4% growth. Moreover, the data for the last three months of 2018 was showing wage growth estimated at 3.5% [source].
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The significance of the data from the last report stems from the fact that the first three months of 2019 break the trend of increasing growth in wages, as adjusted against the national GDP, and conversely, slower wage growth is going to have a hampering effect on the inflation rate inevitably.
Investors fear that this turn in for the worse in the labour market might be a manifestation of big business and capital flowing out of the UK, as the Brexit October deadline approaches.
Overall, the pound was weakened by the news and the fears of a potential turn for the worse in the British labour market that could also have negative ramifications for the entire economy, caused the GBPUSD pair to decrease with 0.41% in yesterday’s trading session. The currency pair is currently trading at 1.29158 and is nearing the significant support level at 1.28841.
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