For Those Who Don’t Believe in Brexit

Posted Wednesday, March 15, 2017 by
Skerdian Meta • 1 min read

Actually, the title should be “You see? Brexit is pulling the UK economy down before it even began” but that would be too long, so let´s stick with the one we have.

The UK employment report was just published and looking at it through an untrained eye, it seems impressive. Unemployment claims fell by more than 11k when the expectations were for 5k, while the unemployment rate declined by a tick to 4.7%.

That sounds great, but it really isn´t. In fact, it´s horrible. Of course, it´s horrible when wages go down; it´s like going back psychologically.

The wages are not going down actually, but the pace of the increase is declining and it´s declining fast. This is the second month in a row that we´re seeing a slowdown. In the last reading, we saw a decline from 2.8% to 2.6% and this month they moved even lower to 2.2%.

Comparing to other developed economies (US, EU, Japan), a 2.2% pickup in wages looks pretty good for a year, but not in the UK. The cheaper Pound has added the inflationary pressure and inflation is at around 2% at the moment.

But with the pace of the decline, I think that next month we´ll dive below 2%, which means that inflation is going up faster than wages. That´s horrible at whatever angle you look at it. The funniest thing is that the real Brexit hasn´t even started yet, hence the 50 pip tumble in GBP/USD.

Personally, as much as I hate to admit it, I expect things to get worse as Article 50 gets activated and the real Brexit starts.

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