Unemployment Falls as Estate Agents Hire Staff

As I have noted before, the British economy is driven by the property market and people's confidence (usually misplaced, given that property prices are relative) that an increase in house prices is an increase in personal liquid wealth.

Thus it should come as no surprise to see that today's announcement that unemployment dropped to 7.7%, from 7.8% in the three months to April, is largely due to an upturn in confidence in the property market.

Overall 80,000 jobs were created over the period, significantly above the predictions by "experts" and economists of an increase of 55,000. However, accounting for a large part of this 80,000 increase was a rise in the number of "real estate" jobs (on the back of a surge in confidence in the property market) of 50,000.

NB: "Real estate" jobs are in the main estate agents.

Pre Election House Price Bubble On Its Way

According to the Office for National Statistics (ONS) House prices rose 0.4% in June compared to the previous month, the year on year rise now stands at 3.1% compared with 2.9% in May.

This increase outstrips price inflation (CPI) which was 2.9% in June.

Howard Archer, chief UK economist at IHS Global Insight, is quoted in the Telegraph:

"We now expect house prices to rise by at least 3pc over the rest of 2013 and to then increase by 7pc in 2014."

House price bubbles of course will benefit the government in the run up to the election, as people (rather foolishly, given that the rise is relative) feel better off when the house that they live in rises in value.

UK Construction Jumps

UK construction activity rose in July to its highest level since June 2010.

Reuters reports that the Markit/CIPS construction PMI rose to 57.0 July, up from 51.0 in June. The rise is mainly on the back of an increase in residential construction which has spurred an increase in confidence of purchasing managers.

Whilst the increase in residential construction is hardly surprising, given the increased stimuli to the sector offered by the Chancellor, the size of the increase in PMI is above expectations and as such is very welcome.

Tim Moore, senior economist at Markit said:

"July's survey highlights a new wave of optimism across the UK construction sector, with companies reporting a pace of expansion in excess of anything seen over the past three years."

Like it or not, the UK economy's bedrock is the property sector; by stimulating that sector the Chancellor has in effect stimulated the economy.

The question is, will this stimulation create an inflationary asset bubble?