Eurozone unemployment rate declined to its lowest in 7 years - ING

Bert Colijn, Senior Economist at ING, suggests that the Eurozone unemployment rate continued its trend of slow but sure declines in May.

Key Quotes

“The unemployment rate declined to 10.1% in May, its lowest in 7 years. The strength of the labour market has been a driver of growth in the early months of the year, when foreign demand decreased as low oil prices and China weakness sparked global concerns about growth. Now that Great Britain has voted to leave the EU, it seems that this summer will also be one of market volatility and growth concerns, so labour market strength ahead of the vote could help mitigate the impact of the shock on the Eurozone economy.

There was an acceleration in the decline as unemployment declined by 112,000 people in May compared to 75,000 in April.  While this is encouraging, it is far too early to cause price pressures in the labour market so far. With unemployment still in the double digits, it is no surprise that wage growth is still about 0.7% below its long-term average as labour shortages only exist in a few pockets of the job market. A significant uptick in wage growth, which could support core inflation therefore seems unlikely. Much to the dismay of the ECB, the return of Eurozone wage pressures will likely be a slow process.”