Over the past couple of weeks — and since the election of the anti-austerity Syriza party — much has been made of Greece’s potential exit from the European Union. Indeed, US and UK markets have traced the ever-changing status of negotiations as Eurozone finance ministers meet with Greek counterpart Yanis Varoufakis to discuss a bailout deal. However, with so much focus centred on the (potentially) economically disastrous effects of a ‘Grexit’, many forget to consider that certain economies are doing pretty well otherwise and Jobs Markets Strength seem to be covered by the ‘Grexit’ Fear.
A look to the UK shows that the country’s underlying economic strength is impressive. On the 19th of February, the UK blue-chip index, the FTSE 100, approached an all-time high figure of 6,930.20 not seen since December 1999 – even with much uncertainty surrounding Greece. This would suggest that, were it not for the constant back and forth within the EU, the primary UK index may have breached a 15-year record.
In fact, there have been a few chunks of recent economic data to support this. British income tax receipts jumped in January to produce the biggest monthly surplus in seven years. The Office of National Statistics revealed that the January public Finance surplus was up 35% from the same time last year to £8.8 billion. Add to this a 6.1% raise in revenues from capital gains and income tax and it would appear, from these figures at least, that the economic recovery might finally be paying dividends. Further to this, borrowing in the first 10 months of the tax year has fallen 7.5% to £74 billion, well below the forecast of £91.3 billion.
It is not only an improved tax surplus and reduced borrowing that may cause optimism but retail sales have also improved over the past months. This shows that, not only are people theoretically earning more and borrowing less, people are spending more. Despite a 0.3% fall in volumes in January, sales were actually up 5.4%, compared with the same period last year. Although this may have been lower than some were forecasting, it comes across as a strong figure when paired with a 0.2% rise in retail sales in December.
However, it would appear that, despite data to the contrary, real wages are actually tracking below the rate of inflation. In fact, there have been several revealing snippets of data that show that, not only is the UK not meeting inflation targets for real wages but they seem to be falling behind many G20 countries in this area – ranking below Australia, Canada, Germany, France, the US, Japan and even Italy.
Meanwhile, in the US, the economy has added 257,000 jobs in January, beating expectations of 230,000 jobs and revised figures from November show that 423,000 jobs were added in that month – the highest amount since May 2010. These figures look all the more positive when you consider that the US has seen the number of jobs added come in over 200,000, every month since April last year. What is more, average wages in the US have increased by 2.2% over the past 12 months, suggesting that not only are there more jobs but they are paying better than expected (a 1.9% increase was forecasted). Yet, as with any statistic, these figures are perhaps a little misleading as US unemployment figures actually increased from 5.6% to 5.7%.
Ultimately, the UK and US at least have seen positive signs of growth within their jobs sectors, which could imply that the economies as a whole are improving. Indeed, promising GDP figures from both countries might support this. However, how the recent furore over Greece’s debt deal may have illuminated some obvious cracks in the superpowers. That is to say that: If the countries are sufficiently exposed to global economic events that a Greek exit could send the US and UK economies haywire, are the respective economies that strong at all?