Eurozone: Labour market strength unscathed - ANZ

Labour market growth in the euro area has remained strong despite the deceleration in H1 2018, notes the research team at ANZ.

Key Quotes

“In Q1, employment grew by 0.4% q/q compared with 0.3% q/q in Q4 and a record number of people were employed (157.2m). The unemployment rate has continued to trend lower, falling to 8.3% in June from 8.7% last December.”

“Employment gains are broad based, and all sectors of the EA economy are showing positive employment growth. Manufacturing had above average employment growth in Q1 (0.5% q/q).”

“The European Commission’s July survey of economic sentiment shows that employment expectations are well above the long run averages for both the manufacturing and services sectors.”

“Readings of capacity utilisation are at a record high for the services sector (90.6) and close to record highs in manufacturing (84.1 vs 85.0). That indicates that demand for labour is likely to remain firm, even if high capacity utilisation provides some limitations to growth in coming quarters. The job vacancy rate in the EA was 2.1% in Q1 vs 1.9% in Q1 2017 and in the services sector it was 2.4%.”

“This positive backdrop to the EA labour market is underpinning some modest upward creep in wages. In Q1, labour costs grew 2.0% y/y as wages and salaries rose 1.8% y/y.”

“Negotiated wage settlements are now beginning to raise wage settlements according to the ECB.”

“Solid labour market growth, upward creep in wages and resilient consumer confidence provide a supportive backdrop for private consumption.”