This is where staff shortages really hurt

In the economic world, low unemployment is usually a positive sign. But in Great Britain, a staff shortage in all kinds of sectors threatens to put a brake on economic growth. This is having an impact on the outlook for the pound.

Did you have to wait a long time for a drink on a terrace this summer? Like many other industries, the hospitality industry is struggling with a significant staff shortage. According to Statistics Netherlands, there are now more vacancies than unemployed. The research firm calculated that there are as many as 100 jobs for every 106 job seekers. In the third quarter of last year, there were just over 50 jobs for every 100 job seekers. And at the beginning of 2014 there were only 15. In other countries, the labor market even means that you can no longer even order a drink in some places.

Prisoners as auxiliaries
At the beginning of this week, no milkshake was available at the more than 1.200 McDonald's branches in England, Scotland and Wales. The main culprit is a lack of supplies due to a shortage of truck drivers. Labor shortages are also being felt in other parts of the economy.

Fast food chain Nando, for example, has closed dozens of restaurants because it failed to get enough chicken delivered. Last Monday, the trade association of meat processing companies begged the government to allow more prisoners to be taken on day leave. Thousands of foreign workers have chosen to return to their home country in view of strict immigration rules after Brexit, while many staff within the sector are also at home with corona complaints.

Christmas without turkey
Inventories at shops have already fallen to their lowest level since 1983. And in recent weeks more and more stories have appeared in British newspapers that households may have to celebrate Christmas without the traditional turkey meal.

But the currency world is increasingly aware of the economic impact of the problems on the British labor market. The IHS Markit index, which reflects how optimistic British purchasing managers are looking to the future, fell from 59,2 to 55,3 in August. That is an indication that growth in the manufacturing industry is cooling off faster than economists are taking into account.

sharp contrasts
In the eurozone, the economic recovery looks a bit stronger than it had been. Last Tuesday, the growth figures for the German economy for the second quarter were slightly increased. In addition, the corona pandemic in Great Britain seems to be flaring up again. Since the beginning of August, the average number of infections per day has risen from 25.000 to almost 34.000.

On the mainland, the virus outbreak is getting better and better under control. In the first weeks, the pound briefly reached its highest level since March 2020. Since then, however, the currency has taken a step back. As the contradictions in both economic growth and corona infections intensify, this could just be the start of a bigger slide for the pound.

Joost Derks

Joost Derks is a currency specialist at iBanFirst. He has over twenty years of experience in the currency world. This column reflects his personal opinion and is not intended as professional (investment) advice.

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