Seasonally adjusted employment:

1Q 2011: flat q/q, +0.1% y/y

MNI survey median: +0.2% q/q, +0.5% y/y
MNI survey range: +0.1% to +0.4% q/q

4Q 2010: +0.2% q/q (revised from +0.1%)
3Q 2010: flat q/q (unrevised)
2Q 2010: +0.1% q/q (unrevised)
—

PARIS (MNI) – Eurozone employment expanded less than expected in
1Q, as hiring in industry and business services was offset by downsizing
in agriculture and construction, Eurostat said Thursday.

Employment increased by roughly 100,000 or less than 0.05% in 1Q to
146.5 million. This was nearly half a million above the trough at the
start of 2009 but still 3.4 million fewer than at the pre-crisis peak in
the spring of 2008.

The number of people without work declined in 1Q by a net 64,000 to
15.64 million, trimming the jobless rate by 0.1 point to 9.9%, Eurostat
estimated earlier this month. April brought a further drop of 115,000,
suggesting that hiring picked up at the start of 2Q.

Across sectors, payrolls increased in 1Q by 0.8% in business and
financial services, by 0.4% in manufacturing, and by 0.1% in trade,
transport and communication. Employment fell by 1.6% in agriculture, by
0.8% in construction and by 0.1% in public administration, health and
education.

Not surprisingly, employment gains were strongest in the core
Eurozone countries where the economic recovery has been sustained, while
losses were sustained across much of the periphery.

Among the large economies, Germany posted the largest quarterly
rise (+0.4%), followed by France (+0.3%). Payroll gains were also
registered in Austria (+0.4%), Belgium (+0.2%), Finland (+0.3%),
Slovakia (+1.3%) and Estonia (+3.3%). Employment was flat in the
Netherlands after a strong pick-up in 4Q.

Job losses were registered in Italy (-0.6%), Spain (-0.4%),
Portugal (-0.1%), Slovenia (-0.6%) and especially Greece (-2.2%). No
data were available for Ireland, where layoffs have been severe in
recent quarters.

The recovery in employment is likely to remain gradual, given
prospects for moderate economic growth.

The PMI polls suggest that hiring in the services has stabilized in
recent months at a lethargic pace (52.0). In line with the slowdown in
industry, factory job gains have lost a little steam since 1Q to a
four-month low in May (54.3). Employers’ outlook for payrolls
deteriorated in all business sectors in May, according to the European
Commission’s survey.

The Commission expects Eurozone employment to rise by 0.4% on
average this year and 0.7% next year, enough to trim the jobless rate by
0.1 point and 0.3 point, respectively.

“However, despite brightening somewhat since the autumn, and given
the extent of labor hoarding during the recession, the outlook remains
for rather subdued job growth and potentially persistent high
unemployment at the aggregate level,” the Commission cautioned in its
spring economic outlook last month.

A very slow decline from very high levels of unemployment means
that wage gains will remain subdued and probably lag the acceleration in
inflation, leaving little leeway for a significant recovery in
consumption.

Even in Germany, where there are signs of labor shortages in some
sectors, pay accords so far this year have been remarkably moderate in
light of the wage restraint of past years. Fiscal consolidation and
sub-par growth will weigh on pay in peripheral countries.

The European Central Bank said Thursday it expected employee pay
gains to increase gradually while remaining moderate overall. This
would contribute to a slight rebound in unit labor cost growth.

“Labor cost pressures are nevertheless likely to remain contained
in the medium term in the light of only gradual labor market
improvements,” the ECB predicted in its Monthly Bulletin.

–Paris newsroom +331 4271 5540; e-mail: stephen@marketnews.com

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