Unemployment falls away

Unemployment Figures

According to figures released yesterday UK unemployment fell by 39,000 to 1.61 million in the three months to the end of February. The figures were also the lowest since records began in 1971 at 29.5 million. However, some analysts believe this figure is slightly misleading as the manufacturing sector, a key part of the UK economy, has actually lost 27,000 jobs in the three months to February. Indeed, records for this particular sector were the lowest since 1978. The two data almost contradict each other. Indeed, in early April the International Monetary Fund predicted that the UK economy would grow by 1.6% in 2008 and 2009 much slower than the Treasury’s forecast of 2% this year and 2.5% the next.

Yesterday’s trading saw the Pound again reach record lows following Tuesday’s CPI (Consumer Price Index) data which came out at 2.5% against an expectation of 2.6% . Meryvn King is currently having a very tough time as he see inflation reaching 3% later in the year against the government’s target of 2%. Theoretically when inflation is high there is an argument to increase interest rates but with falling house prices and fewer mortgage approvals an interest rate hike would almost send the housing market into a freefall. Indeed, an interest rate cut seems very likely in order to help with the credit crunch.

Gordon Brown

Gordon Brown yesterday spoke with Wall Street bankers and asked them to fully disclose the extent of the recent losses in an attempt to quickly avoid a global credit crunch. He is also meeting with President Bush later today and tomorrow with Federal Reserve chairman Ben Bernanke for their thoughts on how to solve the problems which began in summer 2007. Indeed, the GBP –Euro rate has dropped by over 17% since August 2007 and there seems little support for the Pound. If we equate this sum to a property price of €200,000 the difference is a staggering £26,000, a huge difference I’m sure you’ll agree.

Further, to highlight the UK’s political problems Gordon Brown’s poll ratings dropped at the sharpest rate for any leader since World War Two. It is often said that economics and politics tend to have huge influence of a currency’s value and with both looking very bad at the moment it is not a question of when the Pound will recover but if and how long.

US Economy

Focusing on the Dollar later today at 130pm Initial Jobless Claims are released. The estimate is for 365,000 and in light of recent credit crunch fears both in the UK and the US my personal opinion is that we may see a higher figure. However, although typically when the figures are worse than expected the US Dollar loses strength I believe that the recent negative events surrounding the Pound will not necessarily advantage anyone holding out until after the report.

In order to avoid further pitfalls and potential of a price increase of that dream property abroad please contact one of our experienced and friendly dealers who can guide you through the process of securing your currency.