UK Labour Market Decline Slowing -- Sterling to see Significant Rally

The growth in UK unemployment has finally started to slow according to an Office of National Statistics press release issued today.

The release says:

The rate of decline of the labour market has slowed down in the third quarter of 2009. This is shown with the smallest quarterly increase in unemployment rates since the start of the recession in the second quarter of 2008, the largest quarter-on-quarter fall in the number of redundancies, and only a marginal fall in vacancies on the previous quarter.

This is perhaps the biggest indication that the UK recession is finally beginning to ease, following several monthly rises in consumer confidence, and consumer spending increasing on an annual basis two months running.

Little wonder then that the pound is rallying against its rival currencies. IN the last couple of days the pound finally crossed the 1.13 barrier on the Euro, though it is back down to 1.128 now. Against the dollar the artificial barrier in recent months has been 1.67, but it is currently at 1.681, and it is also doing well against the Turkish Lira, sitting just below the recent ceiling of 2.50TYR, at 2.491.

If this is indeed the start of the UK recovery proper, then the pound will continue to strengthen against all those currencies and more. This will impact on the UK housing market, by causing foreign buyers to become far less frequent. It will also make Eurozone and American property cheaper to British buyers, as well as property in any other country the pound rises massively against.

The unemployment rate has been one of the biggest stumbling blocks to this growth in the value of sterling. It would have been far better if UK GDP had registered positive growth for the third quarter. However, the recent inflation report was also pretty positive, and combined with the labour market data, should be enough for a significant rally on the value of the good old British pound -- watch this space.

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