European Central Bank (ECB) policymakers have been more cautious against the backdrop of a continued strong labor market in the Eurozone, fearing that wages could bring persistently high pressures. The unemployment rate in the eurozone fell to 64%, a record low, and nearly 100,000 fewer unemployed than a month ago, showing resistance to the current economic downturn.
The European Central Bank (ECB) last month did not endorse investors' expectations of an imminent rate cut, stressing the need to see signs of cooling wage pressures to ensure inflation is on track to reach its 2% target.
According to Eurostat, the number of unemployed in the eurozone fell to 10.97 million in November last year, a decrease of 990,000 people, a year-on-year decrease of 2820,000 people. The improvement was mainly reflected in Italy, where the number of unemployed fell by 6 in November60,000 to just over 1.9 million.
Economists had previously ** the Eurozone unemployment rate would remain at 6 in November5% unchanged, but the actual performance shows greater resilience. The ECB will discuss monetary policy on 25 January, and the labor market data may make it more cautious about rate cuts in the future.
Although the Eurozone unemployment rate is expected to rise this year due to sluggish economic growth, weak demand, wages**, and the impact of layoffs in some sectors, the current strength of the labor market is impressive.
Tomaz Wildek, an economist at Puxin, said the weakness in the real economy has not yet been passed on to the labor market, and weaker inflation in the short term is unlikely to reassure the ECB, as wage pressures and the risk of medium-term inflation above target remain high.
However, some economists noted that survey data suggesting hiring intentions may be cooling, and some industries are looking to lay off workers, mainly in manufacturing, as the outlook for these sectors remains bleak. The challenge for the ECB is to balance falling unemployment and rising inflation.
The eurozone unemployment rate has almost halved, peaking at 12% in 2013 and rising briefly in 2020 but now declining. Businesses have been hoarding labor recently, but some economists say this is unsustainable as real wages continue to be ** and it will become unaffordable to maintain so many workers.
The ECB will keep a close eye on economic activity, especially some unfavorable indicators, such as a decline in German factory output and a month-on-month decline in retail sales in the eurozone. Currently, the Eurozone economy continues to perform strongly while the labor market remains weak.