‘Feel better’ factor builds as economy revives - City Comment
18 July 2013
The ‘feel better’ factor continues. It’s not just the two Ws, Wimbledon and the weather, that have wowed the nation but a regular stream of positive or at the very least benign economic stories culminating in this week’s welcome labour market news indicating a recovering workforce too.
Thu, 18 Jul 2013 | By Sue Dodd, director, Agile IntelligenceThe ‘feel better’ factor continues. It’s not just the two Ws, Wimbledon and the weather, that have wowed the nation but a regular stream of positive or at the very least benign economic stories culminating in this week’s welcome labour market news indicating a recovering workforce too.
This has now been topped by news that the International Monetary Fund (IMF) has just announced a u-turn in support of the chancellor’s ‘Plan A’ austerity policy.
Following Mark Carney’s arrival as governor at the Bank of England, we have quickly seen a move towards forward guidance on interest rates - mirrored also by the European Central Bank (ECB) and an upward revision of GDP growth by the IMF, which simultaneously cut several other country forecasts. This is all evidence that Q2 looks to be well into growth and a slowly improving jobs market especially displaying good improvements in vacancies.
Despite this there are still many uncertainties while manufacturing and construction are still both very slow to respond, if at all, to the more positive vibes, as the one is dependent substantially upon UK export markets and the other on housing starts and the commercial property market.
Nevertheless, there are pockets of recovery across all industries with hotspots in manufacturing such as automotive offset by those weaker segments dependent upon overseas economic recovery and a competitive exchange rate. At least the latter looks fairly well set following the advice on future rates from the Bank of England recently which prompted a drop in sterling and the news today that the bank itself is “retreating” from its quantitative easing (QE) programme and it will now look to nurture recovery in other ways than these asset purchases.
On the workforce itself the growth just now appears to be polarised, derived from professional and skilled jobs while less skilled roles remain weaker. This may help explain the rise in long-term unemployed despite an overall drop in unemployment and it looks to present a key challenge.
The good news though is that the claimant count fell again, redundancies dropped and job vacancies are heading back towards levels not seen for almost five years. Taken together with more general economic news, notwithstanding the rise in inflation, signs of an upturn are now feeling much more tangible than even a few months ago. How the markets will react to the Bank’s new stance on QE, IMF comments and forward guidance will perhaps not become apparent until next month’s Bank of England Monetary Policy Committee meeting.
Meanwhile a quick run around the Q2 results announced this week sees PageGroup, with gross profit down 3.8% at constant currency, joining SThree as one of the weaker performers amongst the UK majors while Robert Walters saw the strongest net fees growth at 7% and in the same week Hays (+1%) also gained. UK performances are now more robust for some at least while Asia Pacific is presenting some challenges to all operators, especially in Australia.
This has now been topped by news that the International Monetary Fund (IMF) has just announced a u-turn in support of the chancellor’s ‘Plan A’ austerity policy.
Following Mark Carney’s arrival as governor at the Bank of England, we have quickly seen a move towards forward guidance on interest rates - mirrored also by the European Central Bank (ECB) and an upward revision of GDP growth by the IMF, which simultaneously cut several other country forecasts. This is all evidence that Q2 looks to be well into growth and a slowly improving jobs market especially displaying good improvements in vacancies.
Despite this there are still many uncertainties while manufacturing and construction are still both very slow to respond, if at all, to the more positive vibes, as the one is dependent substantially upon UK export markets and the other on housing starts and the commercial property market.
Nevertheless, there are pockets of recovery across all industries with hotspots in manufacturing such as automotive offset by those weaker segments dependent upon overseas economic recovery and a competitive exchange rate. At least the latter looks fairly well set following the advice on future rates from the Bank of England recently which prompted a drop in sterling and the news today that the bank itself is “retreating” from its quantitative easing (QE) programme and it will now look to nurture recovery in other ways than these asset purchases.
On the workforce itself the growth just now appears to be polarised, derived from professional and skilled jobs while less skilled roles remain weaker. This may help explain the rise in long-term unemployed despite an overall drop in unemployment and it looks to present a key challenge.
The good news though is that the claimant count fell again, redundancies dropped and job vacancies are heading back towards levels not seen for almost five years. Taken together with more general economic news, notwithstanding the rise in inflation, signs of an upturn are now feeling much more tangible than even a few months ago. How the markets will react to the Bank’s new stance on QE, IMF comments and forward guidance will perhaps not become apparent until next month’s Bank of England Monetary Policy Committee meeting.
Meanwhile a quick run around the Q2 results announced this week sees PageGroup, with gross profit down 3.8% at constant currency, joining SThree as one of the weaker performers amongst the UK majors while Robert Walters saw the strongest net fees growth at 7% and in the same week Hays (+1%) also gained. UK performances are now more robust for some at least while Asia Pacific is presenting some challenges to all operators, especially in Australia.
- Click for more from Dodd and Recruiter's panel of expert City Commentators.
