The pound rose against the US dollar following strong UK labour-market numbers. British employers added a record 241,000 staff in August, pushing the total number of employees on company payrolls above pre-pandemic levels, official data showed on Tuesday.
The latest unemployment report by the Office for National Statistics shows job vacancies rose above one million for the first time since records began as the UK economy continues to recover from the Covid-19 pandemic, while payrolls rose by more than expected. The strong data will possibly help persuade Bank of England policymakers that perhaps UK monetary policy could be tightened sooner than expected.
The latest unemployment report showed the number of vacancies in the three months to August to have reached above one million, as firms struggled to fill positions mainly in the hospitality, transport and storage sectors. It also showed a lower unemployment rate and a monthly increase in August payrolls.
The ONS stated: “The fastest rate of growth was seen in other service activities, which grew by 93.3% (12,500), followed by transport and storage at 76.3% (20,300) and accommodation and food service activities at 75.4% (57,600). In the latter two categories labour demand has increased rapidly while staff availability fell because of a mix of employees leaving these sectors to find employment elsewhere and a reluctance of workers to return to their previous roles.”
Minister for Employment Mims Davies MP has welcomed the rise in payrolls and said: “As we continue to push ahead with our recovery, it’s great to see another significant fall in unemployment and the number of people on payrolls rising by 241,000 in August – the biggest monthly increase on record – showing our Plan for Jobs is working. We’re helping employers recruit for the record number of vacancies out there, particularly in growing sectors, and supporting people of all ages and backgrounds to overcome barriers, land their next role, and progress in work.”
While payroll employment is back at pre-pandemic levels, there are still many years ahead of recovery, with employment more than 700,000 down and long-term unemployment up 45%. There are still more than a million people furloughed and with the scheme ending this month, more people will be looking to find employment.
Furlough scheme concerns
Economists and politicians are worried that with the furlough scheme ending this month, jobs recovery will be hurt, after the rise in payrolls and vacancies. A lot of furloughed staff might not even return to their jobs as a lot have had their wages subsidised and might not be kept into full-time employment.
There is also a skill shortage as many industries have reported a lack of available labour and hiring difficulties. With Covid adding more uncertainty after Brexit and the new national insurance tax adding more costs to employers, it is unclear how businesses will respond to future hiring needs.
While the data is positive for the pound, investors remain cautious ahead of Wednesday’s UK inflation data, which could show an increase in the core rate in August to 2.9% year/year from July’s 1.8%.
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