UK unemployment measures have begun to bend lower. The drop in the number of claimants in Sept was unexpected. The unemployment rate is at the lowest level in more than a year as the labor market absorbed record number of workers during the Olympics. The unemployment rate, under the definition of the International labor Organization, declined to 7.9 percent in the June-August period from 8.1 percent during March-May.

The UK economy has not been giving off many signs of improving behavior so the improved labor market metrics were a bit of a surprise.

Because of the Olympics and some earlier distortions from the Queen’s Jubilee it is unclear how accurate a reading we are getting of the real UK economy. Just today BOE Deputy Governor Tucker was warning banks on their leverage and cautioning that the ‘worst may still lie head’ for them.

The UK is plugged into trading with Europe and that still seems every much laden with risk. But its North America trade should fare better as the US and Canadian economies are doing much better than Europe.

Still the UK continues to be enmeshed in difficult times and is very entangled in European events. Even though the claimant rate and the overall unemployment rates each have dipped, there is no assurance that such a signal is real.