Has The Dismal UK Employment Data Impacted Stock Markets?

FTSE 100 index rallies despite worrisome data released by the government on the job losses front

Summary

• The county records an unemployment rate of 3.9 per cent for the second quarter of 2020
• Younger and older people had been more susceptible to job losses
• The total actual weekly hours worked in the UK plummeted by a record level of 191.3 million (by 18.4 per cent) during Q2 2020
• The claimant count data has also shot up between March and July 2020
• FTSE 100 index increased by 2.9 per cent post the government unemployment data release

The UK government’s Office for National Statistics (ONS) released the employment data on 11 August 2020. It stated that though the unemployment rate remained unchanged at 3.9 per cent during April to June 2020 as compared to the previous quarter, but structural changes are seen in the data.

It is pertinent to note that employment for people aged between 16 to 24 years, dropped by 100,000 to reach a level of 3.72 million during Q2 2020. Moreover, 161,000 jobs were lost for people aged 65 years and above, to touch 1.26 million for the quarter.

At the same time jobs fell by a relatively lesser number of 41,000 for people aged between 25 to 64 years, to hit a 27.94 million figure. This implies that younger and older people had been more susceptible to job losses during the second quarter of 2020.

Since the unemployment data captures the number of people actively looking out for job, a steady rate during these turbulent times of high amount of job losses could also mean that many people are giving up looking out for work.

Government statistics also revealed that 7.5 million people were off any work during June 2020. This figure has shot by almost three times since March 2020.

(Source: Office for National Statistics – Labour Force Survey)

Between Q1 and Q2 2020, total actual weekly hours worked in the UK plummeted by a record level of 191.3 million to reach 849.3 million hours during April to June 2020. This was a hefty quarterly fall of 18.4 per cent, and is a perturbing statistic.

Further, the job redundancies also rose by 27,000 during Q2 2020 as compared to the last quarter to touch 134,000.

(Source: Office for National Statistics, UK)

After increasing steadily for years since 2014, the total number of employees on payroll across Britain has dropped by 730,000 in July 2020 (flash estimates) from 29 million in March 2020.

The claimants count rose by a bothersome 116.8 per cent between March to July 2020 in the country.

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FTSE 100 soars

It seems that the FTSE 100 index has not yet incorporated any impact of the alarming changes estimated in the latest government unemployment data. The index soared to 6,188.83 points, up by 2.29 per cent on 11 August 2020 at 10.30 am, from the previous close. Its 52-week low / high range remains at 4,993.89 / 7,674.56.

Market experts believe that Bank of England’s promise of further quantitative easing stimulus is keeping the London stock market afloat.

Economists also caution that the expected fall in the unemployment numbers is certain to come, once the furlough scheme is withdrawn in October 2020. This government scheme is supporting close to 9.4 million jobs across the UK, which were under threat, as a result of the coronavirus pandemic.

The main FTSE drivers were seen to be the IAG Group, Rolls-Royce Holdings, GVC Holdings, ITV, and the InterContinental Hotels Group.

The share price of International Consolidated Airlines Group SA (LON:IAG) moved up by 7.54 per cent from the previous day’s close to touch GBX 216.90 on 11 August 2020 at 11.54 am. The 52-week low / high range was recorded to be 163.85 / 671.00. The company had a market capitalisation of £ 4,006.33 million. The volume of shares traded were 13,694,245.

The stocks of Rolls-Royce Holdings (LON: RR.) jumped to reach GBX 273.40, up by 2.90 per cent from the previous day’s close on 11 August 2020 at 11.55 am. The 52-week low / high range was recorded to be 230.40 / 832.00. The company had a market capitalisation of £ 5,130.65 million. The volume of shares traded were 20,679,792.

GVC Holdings Plc (LON:GVC) shares were trading at GBX 761.40, up by 6.34 per cent on 11 August 2020 at 11.58 am. The company had a market capitalisation of £ 4,178.23 million. The volume of shares traded were 1,376,347. The 52-week low / high range was recorded to be 323.70 / 939.00.

ITV Plc (LON:ITV) shares were trading at GBX 64.06, up by 3.29 per cent from the previous day’s close on 11 August 2020 at 12.46 am. With a market capitalization of £ 2,496.56 million, the company was giving an earnings per share worth 0.12 and a dividend yield of 5.3 per cent. The share’s 52-week range was recorded as 54.42 / 156.50.

InterContinental Hotels Group (LON:IHG) stock was trading at 4,170.00 on 11 August 2020 at 12.57 am, up by 4.22 per cent as compared to the previous day’s market closure. The 52-week low / high of the company was 2,385.50 / 5,303.00. Its total market cap was recorded at £ 7,308.08 million. The total volume of shares traded was 344,477.

To sum up, the ONS released the unemployment data for Q2 2020 which puts the employment rate unchanged at 3.9 per cent. However, it is feared that this rate will jump after October 2020, when the government furlough scheme comes to an end. The total actual weekly hours worked across the nation have fallen by 18.4 per cent for the quarter, which is a matter of concern. There has also been a drastic jump of 116.8 per cent in the claimant count data between March and July 2020.