The eurozone’s jobs recovery looks set to play an increasingly important role in keeping growth in the region on track as export trade slows, the European Central Bank has said.
The economy here has added more than 7m jobs since the depths of the crisis and there are increasing signs that wages are beginning to rise at a faster pace. In a paper out on Wednesday, the ECB said the improvements in the labour market were the most important reason why businesses and households had started to spend again.
“Private consumption has clearly recovered from the losses during the financial crisis,” the paper, part of the ECB’s monthly bulletin, said. “This has been largely driven by the recovery in the labour market, even though unemployment in some countries and some groups of workers remains higher than before the crisis.” Consumption is the most important component of GDP.
There was, the paper said, “still scope for further growth” as labour market conditions continue to improve — an encouraging prediction in the face of increasing signs that business in the region is beginning to suffer the ill-effects of the global trade war.
Growth has slowed over the course of 2018, after rising strongly last year. In the second quarter, the growth rate was 0.3 per cent — down from 0.7 per cent in the final quarter of 2017. After rising above 12 per cent during the worst years of the crisis, unemployment is now at 8.3 per cent — the lowest level in almost 10 years.
Wage growth remains weak but negotiated pay deals are beginning to offer workers a better deal. The paper said the ECB’s €2.5tn quantitative easing programme had supported spending due to the impact on the policy in lowering borrowing costs for unemployed or highly indebted people.