1 Dec 2015
Eurozone unemployment steadily declines, but not enough to push inflation - ING
FXStreet (Delhi) – Bert Colijn, Research Analyst at ING, notes that the Eurozone unemployment decreased from 10.8 to 10.7 percent in October while the number of unemployed declined for the 13th month in a row, even though the decline was relatively small with just 13 thousand less unemployed in October.
Key Quotes
“This was mainly because the steady declines in Spain halted, while France even saw a slight increase in unemployment in October leaving its rate at 10.8 percent. Germany saw another small decrease in the number of unemployed, but as Germany is currently around full employment, it is difficult to make large improvements for the Eurozone’s largest job market.”
“Italy was the most positive large country this month as the unemployment rate decreased further from 11.6 to 11.5 percent. Because of the small reduction in the number of unemployed, the labour market contributed weakly to the improvements in domestic demand compared to the rest of 2015 when unemployment reduction averaged 109 thousand per month. Still, the steady declines in the unemployment rate are consistent with moderate consumption growth in the months ahead.”
“The unemployment rate is set to continue to improve in the winter months, as surveys suggest. Employment expectations of businesses in the Eurozone are improving again since July according to the European Commission Economic Sentiment Indicator, while the Eurozone PMI even indicated the strongest monthly employment gain in five years in November. This shows that the outlook for unemployment remains positive.”
“While this is the case, it is unlikely that labour market pressures for the Eurozone as a whole are going to become significant in 2016. The natural rate of unemployment is estimated to be around 9.5 percent, so it will likely be a while before significant wage pressures will come from the narrowing of the job market. This means that inflation will not receive much push from wages and unemployment, which supports the expected upcoming decision of further monetary stimulus by the ECB on Thursday.”
Key Quotes
“This was mainly because the steady declines in Spain halted, while France even saw a slight increase in unemployment in October leaving its rate at 10.8 percent. Germany saw another small decrease in the number of unemployed, but as Germany is currently around full employment, it is difficult to make large improvements for the Eurozone’s largest job market.”
“Italy was the most positive large country this month as the unemployment rate decreased further from 11.6 to 11.5 percent. Because of the small reduction in the number of unemployed, the labour market contributed weakly to the improvements in domestic demand compared to the rest of 2015 when unemployment reduction averaged 109 thousand per month. Still, the steady declines in the unemployment rate are consistent with moderate consumption growth in the months ahead.”
“The unemployment rate is set to continue to improve in the winter months, as surveys suggest. Employment expectations of businesses in the Eurozone are improving again since July according to the European Commission Economic Sentiment Indicator, while the Eurozone PMI even indicated the strongest monthly employment gain in five years in November. This shows that the outlook for unemployment remains positive.”
“While this is the case, it is unlikely that labour market pressures for the Eurozone as a whole are going to become significant in 2016. The natural rate of unemployment is estimated to be around 9.5 percent, so it will likely be a while before significant wage pressures will come from the narrowing of the job market. This means that inflation will not receive much push from wages and unemployment, which supports the expected upcoming decision of further monetary stimulus by the ECB on Thursday.”