The unemployment rate in the Eurozone remained at a historic low for a fifth consecutive month in March, and jobless numbers dropped. This stable labor market could push the European Central Bank (ECB) to maintain caution, even as they prepare for an anticipated interest rate cut in June.
According to data released by Eurostat, the seasonally adjusted unemployment rate held at 6.5% in March — the same as the preceding four months — in line with economists' predictions. Last year, the unemployment rate was slightly higher at 6.6%. The jobless rate for the European Union (EU) as a whole dropped to 6.0% from February's 6.1%, matching the level recorded during the same period last year.
Eurozone unemployment fell by 94,000 on a month-to-month basis in March, totaling 11.087 million people. EU-wide jobless numbers also declined by 74,000, reaching 13.258 million workers.
Youth unemployment, which affects individuals under 25, fell to 14.1% in the Eurozone, down from 14.4% the prior month. In the EU, it dropped slightly from 14.7% to 14.6%. Among EU member countries, Spain reported the highest unemployment rate at 11.7%, while the Czech Republic and Poland registered the lowest rate of 2.9%. “While the stagnating working-age population and the subdued economic recovery preclude a significant increase in the unemployment rate, slightly softer labor demand might impact future wage agreements," noted ING economist Peter Vanden Houte.
Earlier this year, senior ECB officials, including President Christinet Lagarde, expressed concern about wage inflation, predicting significant salary raises amid high living costs. By June, clearer data about both wage inflation and broader macroeconomic trends should be available as ECB staff release the latest set of economic forecasts.
Recently released figures show the Eurozone economy narrowly avoided recession, recording 0.3% growth in Q1. The ECB is widely anticipated to reduce interest rates in June, a move supported by recent comments from policymakers. "The question is pretty much what happens after June," said Vanden Houte from ING, suggesting that continued economic recovery could trigger a tighter labor market and reverse the downward trend in wage growth. He emphasizes the need for the ECB to be cautious during the ongoing rate normalization process.
