UBS On-Air: Paul Donovan Daily Audio 'Hiring and firing'
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Good morning. This is Paul Donovan, Chief Economist at UBS Global Wealth Management. It's seven o'clock in the morning London time on Tuesday the 18th of February. UK labour market data showed stronger employment than had been expected, with the previous month's data being revised to show additional employment strength.

This is in spite of the continual reported despair of employers who in the wake of a tax increase have been prophesying widespread job losses and employment benefit cuts. The economic data shows that this rhetoric is just rhetoric, at least so far. Moreover, employment growth and pay has been concentrated amongst middle-aged employees.

This matters because middle-aged consumers are key consumers, with the spending power to make a difference in overall economic activity. There are some sentiment surveys due today, both at risk of political bias. The German ZDW survey at least measures economic forecasters, but with an election around the corner, even economists might be tempted by political perceptions.

Meanwhile, the US New York Empire State Manufacturing Sentiment Survey is likely to be subject to bias, given the increasingly divided nature of the political scene in the United States. The world, according to Fox News, bears no relation to the world, according to CNN, and US citizens seem reluctant to find the remote and change the channel. There are several central bank speakers lining up today. Bank of England Governor Bailey is probably the most interesting of the lot.

As an actual economist, Bailey has the potential to offer intelligent insights. Not all central bank heads have that ability these days. Moreover, the Bank of England is clearly dealing with a complex economy. And while the idea of further UK rate cuts is established in the mind of the markets, there is just enough uncertainty to make things interesting.

From the US, we have Daly and Barr speaking from the Federal Reserve. There is perhaps too much uncertainty about the US economic outlook to make their remarks really interesting to markets. The Fed's view of the world may be upended by an executive order or reversed by a social media post. There is a television interview tonight with US President Trump, who will be accompanied by Trump megadonor Musk.

markets will be interested in signals of the balance of power between the two. Meanwhile, media reports of federal government job cuts are getting some attention. These are unlikely to make much of a difference to the U.S. fiscal deficit. Excluding the post office, civilian federal employees are less than 1.5% of the U.S. workforce.

Similarly, with a relatively small number of people having been affected, it's unlikely that these job losses will change consumer behaviour when considered at a macroeconomic level. However, there are some supply chain issues that do need to be considered.

If, for example, national parks do not fully open because of a shortage of staff, there would be implications for local private sector tourism business, for instance, which might then fuel a more widespread fear of unemployment. That's all for today. Have a good day.

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