U.K. Jobless Claims Drop To The Lowest In Two Years, London Contributes With 5,500 Of The Fall

Today, unemployment data from the U.K. showed a rise in unemployment in the quarter through July and improvement in last month`s jobless claims.

ILO unemployment rate for the three months ended July advanced to 8.1% from the prior 8.0%. However, the total number retreated by 7,000 while employment surged 236,000 to 29.6 million, marking the biggest rise in two years.

On the other hand, jobless claims for the month of August beat the flat forecasts as it showed a drop of 15.0 thousands, the sharpest drop in more than two years, to 1.57 million while the previous reading of 5.9 thousands drops was revised to -13.6 thousands. Claimant count rate steadied at 4.8% after the previous reading was revised down from 4.9%.

Details with the release signaled that London made up 5,500 of the fall in jobless claims. Hence, it is logic to say that the improvement in jobless claims is not from the real economy it is attributable to the Olympic Games which managed to create jobs in London which may suggest the amelioration will not continue over the coming months.

Britain fell deeper into recession after recording 0.5% drop in the second quarter, following a contraction of 0.3% in the first quarter, while King said growth in the near term will be subdued.

The British economy is still suffering from the slowdown in global economy and the lingering European debt crisis. The BoE expects a contraction of 0.2 percent this year, yet Augusts` services and manufacturing gauges showed improvement.

The report also reflected the weakness in consumer spending average weekly earnings surged just 1.5% in the quarter through from a year earlier after the prior 1.8% increase.

The BoE decided this month to leave both interest rate and APF quantity unchanged to assess the impact of FLS program which is aimed to beef up credit to companies and households.

On the other hand policy makers are probably following "wait and see" strategy as they will wait for action by the ECB which already announced a new bond-buying program last the Fed which will announce its monetary decision in the tow-day meeting starting today.

Minutes of Augusts` monetary decision released showed a unanimous vote to holding both interest rate at its record low of 0.50% and keeping asset purchases at 375 billion pounds till the end of the program in early November.

Now, there is more agreement among the policy making panel as they know that the priority is to boosting the economy after the recede in inflationary pressures, where the bank expects inflation to ease further and continue its direction to target.

The cable continued its rise versus the greenback to trade around 1.6112 after opening today`s trades around 1.6068.