Eurozone: Stable unemployment data - ING

Bert Colijn, Senior Economist at ING, explains that while May is the weakest month in terms of unemployment declines for Eurozone this year, the outlook remains very favourable for the labour market and further declines are to be expected for the summer.

Key Quotes

“Eurozone unemployment improved just marginally in May, with just 5,000 fewer people unemployed. After a strong start to the year, this may come as a slight disappointment. Given the strength in survey data on employment expectations from businesses in both industry and services, there is no reason to assume that job growth will slow over coming months. This means that job market strength will remain an important pillar of the current spell of strong growth in the Eurozone economy.”

“While the labour market has gained importance for monetary policy in the Eurozone, the disappointing unemployment rate for May will not make a big difference for the ECB. In fact, even recent recovery in employment has not been enough to make a compelling case for tightening. This means that a possible upcoming tapering decision will not be motivated by price pressures from the job market, but more by the faded deflationary risks and strength in the economy. If anything, May’s disappointing unemployment declines stress that normalization of monetary policy is still far away as it will be a long time before the job market starts to show the long-awaited price pressures that ECB hawks are hoping for.”