Euro area jobless rate remained unchanged at a record low for the fifth month in a row in March and the unemployment decreased, while a tight labor market could urge the European Central Bank to remain cautious even as policymakers gear up for an interest rate cut in June.
The seasonally adjusted unemployment rate was 6.5 percent in March, which is the same level as in the previous four months, data from Eurostat showed Friday. The rate was in line with economists’ expectations. A year ago, the jobless rate was 6.6 percent.
The jobless rate for the EU fell to 6.0 percent from 6.1 percent in February. The rate was at a similar level in the same month last year.
The number of unemployed in the euro area decreased by 94,000 month-on-month to 11.087 million persons in March. The jobless total for EU fell by 74,000 to 13.258 million persons.
The youth unemployment rate, which applies to those under the age of 25, eased to 14.1 percent from 14.4 percent in the previous month in the euro area. The corresponding figure for the EU fell to 14.6 percent from 14.7 percent.
The number of unemployed youth fell by 30,000 in the euro area.
Among the EU member states, Spain logged the highest unemployment rate of 11.7 percent. The Czech Republic and Poland recorded the lowest rate of 2.9 percent.
“While the stagnating working-age population and the subdued economic recovery preclude a significant increase in the unemployment rate, slightly softer labor demand might have an impact on wage agreements going forward,” ING economist Peter Vanden Houte pointed out.
Policymakers, including ECB President Christinet Lagarde, had voiced concern regarding wage inflation earlier in the year as the negotiated settlements were likely to lead to large pay hikes amid high cost of living.
The rate-setters will have a clearer picture on the same and the macroeconomic outlook in June as the ECB staff releases the latest round of projections.
Official data released earlier this week showed that the Eurozone economy exited a recession by growing 0.3 percent in the first quarter.
The ECB is widely expected to lower interest rates in June and recent comments from policymakers support the expectation.
“The question is pretty much what happens after June,” ING’s Vanden Houte said.
“A continuing recovery could lead to a tightening labor market again, reversing the downward trend in wage growth. Sufficient reason for the ECB to tread carefully in its rate normalization process.”