How should we react to the latest Labour Market Statistics?

Nick Walrond, Director at Sanderson Recruitment, shares his views on how we should respond to the latest Labour Market Statistics Report (May 2013). 

The Labour Market Statistics released yesterday presented us with an account of falling employment rates (down 0.2% from Oct-Dec 2012) and an increasing population of unemployed individuals aged between 16-64 (15,000 more since the final quarter of last year). Yet we have to remind ourselves that such unemployment data is a lagging indicator of the current health of our economy. Expectedly, we saw a sharp rise in unemployment following the start of the recession in 2008, but since then the figures have ebbed and flowed only modestly – reflecting the challenging conditions we have seen over the last 4 years.

Typically we find there are two responses when such reports are published - those of the bulls and the bears. The bulls see the current confidence of the stock market as an ensured return to the good times, yet they should be cautious. Until we see a significant drop in unemployment, we cannot make any assumptions that this is the case. On the other hand, the bears in the market will view the current unemployment figures as a key indicator that the economy has not yet recovered; we are indeed on the mend, but by no means there yet. 

With France returning to recession, I believe that caution is the best approach. The rising stock market will certainly inject some life and wealth for some, but until we see a consistent lowering trend in the unemployment levels, it would appear the bears have taken the right stance - bulls beware!