Euro area employment rises in Q2, jobless rate likely to fall below 9 pct by end-2017

The euro area labor market figures came in line with a broad continuation of the recent positive trend. Euro area employment rose 0.4 percent sequentially in the second quarter, just 0.1 percentage point weaker than the first quarter’s 10-year high to leave the annual rate unchanged at 1.6 percent year-on-year, noted Daiwa Capital Markets Research. This took the number of people in work up to a new record high of 155.6 million, 6.8 million above the cyclical trough four years earlier.

Consistent with the recent trend, among the larger member states, job growth was the most solid in Spain, where it rose 0.9 percent sequentially and 2.8 percent year-on-year. Employment in Germany rose 0.3 percent sequentially and 1.5 percent year-on-year, whereas in France and Italy it was at 0.3 percent sequentially and close to 1 percent year-on-year.

Stable job creation pushed the jobless rate down in June and July to 9.1 percent, 3 percentage points below the peak, and it is expected to drop below 9 percent by the end of 2017, stated Daiwa Capital Markets Research. As the labor market slack gets steadiliy used up, wage growth is expected to pick up as well. Average compensation per employee rose above 1.5 percent year-on-year in the second quarter for the first time in over three years, and the ECB expects it to rise 2.1 percent year-on-year in 2018 and 2.4 percent year-on-year in 2019, in line with a gradual rise in underlying inflationary pressure.

At 18:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at -45.3039, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 68.1666. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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