The number of unemployed in the eurozone fell below 11 million for the first time, or an all-time low of 6.6 percent of the workforce, underscoring the resilience of the bloc’s labor market despite the energy crisis triggered by Russia’s invasion of Ukraine. .
The official number of unemployed in the 19-nation bloc fell by 77,000 in July, according to data released Thursday by the European Commission’s statistical unit. The bloc’s unemployment rate stood at 6.7 percent in June.
In the wider EU, the number of unemployed fell by 113,000 in July, dropping below 13 million for the first time and taking the unemployment rate to a new low of 6 percent.
The strength of the eurozone labor market and the resulting risk that wages will rise sharply have been cited by several European Central Bank policymakers as a reason to try to accelerate the pace of interest rate hikes by a move of 0.75 percentage points. next week.
“Amid record high inflation and record low unemployment, the ECB will see little reason to tighten policy at its meeting next week,” said Jessica Hinds, an economist at research group Capital Economics.
Dutch Central Bank governor Klaas Knot, who sits on the ECB’s Governing Council, said he visited six eurozone countries during his summer holidays, “and in almost every store I went to in all these countries, there were signs saying ‘we’re hiring’ or ‘staff needed’.”
“This should be quite worrying given the continued inflation we’re seeing,” said Knot, who has called on the ECB to talk about accelerating rate hikes to curb inflation.
ECB board member Isabel Schnabel told the Jackson Hole meeting of central bankers last weekend that “tight labor markets” were one of the “significant risks” that “threatened to fuel an inflationary process that is harder to control the more hesitant we act.” the”.
Hinds said, however, that the latest decline in the number of unemployed in the eurozone “will probably be as good as it gets”. “The region is facing a difficult winter and a recession is imminent. So the unemployment rate is likely to rise from here even if short-time work schemes take the hit,” she added.
In response to record inflation in the eurozone, unions are demanding higher wages and several governments are raising minimum wages sharply. Meanwhile, workers in some countries, such as Belgium, have indexation agreements that link wages to inflation.
Paul Hollingsworth, senior European economist at French bank BNP Paribas, said: “There is evidence that companies have to pay more than agreed wages, for example through bonuses, to attract and retain employees, given the tight labor market. ”
Still, there have been few signs of a wage-price spiral in the eurozone so far. The ECB tracker of negotiated wage growth in the eurozone showed that it slowed to 2.14 percent in the second quarter, from 2.84 percent in the first quarter.