What's the verdict on the UK jobs report?

<p>The pound is getting a slight lift from the numbers with cable moving up from 1.2680 to 1.2700-10 at the moment. But is the report a straightforward positive one for sterling? Not quite.</p><p>The standout is once again that wages continue to run hot in the UK, with ONS noting that June recorded the highest annual wage growth rate since comparable records began in 2001. Adding to that, we are now seeing real wages/earnings move back to positive territory for the first time since the end of 2021.</p><p>Then, there is also the fact that payrolls change for June also got revised higher to be more positive.</p><p>Those are the most obvious positive factors, although the stronger wages today should only help to validate another 25 bps rate hike by the BOE to come in September. I doubt we will get to a point where markets will consider a 50 bps move, so with ~85% priced in now for a 25 bps move, there is little upside potential left to factor in. That needs to be a consideration when viewing the pound and its potential to stretch gains further later today.</p><p>Then, there is a couple of downsides to the report with employment falling by 66k and the jobless rate ticking higher by 0.2% for a second month running.</p><p>What does that mean? It just raises further concerns that the squeeze on the economy is starting to translate to the labour market. And in that lieu, it could lead to a sharper downturn in the quarters to come.</p><p>That only validates further concerns that the UK could be facing risks of stagflation and that is certainly not something that the BOE would like to see. Add in higher financing costs and tighter credit conditions alongside the cost of living crisis, that's not quite the recipe for the pound to be optimistic in the bigger picture.</p>

This article was written by Justin Low at www.forexlive.com.