Blaming BIRTE

The Ante-Brexit rhetoric moved up a gear this week, as no less than eight former US Treasury secretaries warned that leaving the EU would threaten London’s pre-eminence as a financial capital, whilst the “chief” himself, President Obama, is expected to repeat his concerns as he starts a brief stop-over in London today.

Meanwhile, just about any piece of disappointing UK economic data released is seized upon as being due to the uncertainty ahead of the late June referendum on continued EU membership or otherwise, including the 3-month to February unemployment number released yesterday

Whilst the headline unemployment rate was unchanged, at 5.1%, there were concerns raised in respect of the 20,000 rise in employment versus the 60K created in the 3-month period to November 2015 and the 65,000 average of the period 2000 through 2007. So what to think?

As always, a picture tells a thousand words, so let’s look to the charts:

21 April 2016

First up is a long-term history of the jobs created (or lost if below the zero line) shown as pink bars, with the scale on the left. As can be seen, there has been a steep fall since the near 150,000 tallied for November 2015. Overlaid is the black-line, with a right-hand scale, of the Bloomberg “indicator of real-time employment,” known as BIRTE, a compilation of data from the European Commission, the Office of National Statistics and the Bank of England, none of whom have a particularly good track record for accuracy.

Either way, one can note a reasonable correlation between the two variables and can observe that whereas BIRTE led the decline into the lows of 2009, it is the employment change number that has been the leading indicator since the 2014 high. This would suggest that BIRTE is about to dive!

Of course the “talking heads” within the financial media have been grasping at straws to explain the rapid slow-down of UK jobs, including that of uncertainty surrounding the referendum. For ourselves, we remind of our February posting called, “Brexit, Socionomically Thinking,” which concluded that mood governs events and that the stock-index, in the UK’s case the FTSE All-Share Index, is the best “barometer” of it.

As can be seen from the updated All-Share chart below, the UK collective social mood has been in a falling trend for a year or so now, albeit that there has been a slight up-tick over the past couple of months:

21 April 2016 2

The stock-index is a leading gauge of economic data hence we shouldn’t be surprised that BIRTE and the jobs created are headed lower, as it will be the trend of the collective social mood that decides the referendum result.

So don’t blame BIRTE or any other news, financial or otherwise, just keep an eye on the All-Share Index as it will tell you all that you need to know in respect of the Yes or No vote.









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