Trading preview: UK labour market data could surprise to the downside

UK labour market report released at 9.30 GMT

There’s some bullish sentiment going into the UK jobs report at 9.30 GMT, from more than a few market players, who are seeing further strength in labour and wage. I think there a bit of risk with that line of thinking.

Here’s the numbers expected;

The claimant count (Jan) is expected in at 4.1k vs 8.6k prior.
Unemployment rate (Dec) 4.3% exp. Prior 4.3%
Average weekly earnings (Dec) 3m y/y 2.5% exp. Prior 2.5%
Ex-bonus 2.4% exp. Prior 2.4%

As we’ve seen from prior jobs reports around the major economies, the Nov/Dec/Jan period can be full of seasonal skews. The UK report is double skewy because it covers two months (claimant count vs Unemployment rate/wages etc). This means we could see some swinging data. If anything, I’d be looking to see if the claimant count rose more than expected due to the usual post-Christmas jobs volatility. Wages is a tough one because Dec is still in the holiday period. If retail sales are any guide (they dropped smartly in Dec), that could also be a loose signal that a lot of staff might have been let go. As staff can work longer hours and more temp staff are taken on in the holidays, that can inject some wages skew too so we could see them pull back a touch.

There’s a lot of permutations in this one so it’s going to be hard to trade if the numbers counteract each other. On that basis, and for picking a trade, I’d stick to whatever the wages numbers are, as the main focus is on the BOE and whether a May hike is on the cards. The claimant count and unemployment rate will only be a secondary thought, if there’s a big variation to what’s expected/prior.

GBPUSD is on the offer going into the numbers so the market might have sniffed out a bad number, or else it’s just squaring up for the numbers.