EconomyEurozone jobless rate hits new low as unions intensify...

Eurozone jobless rate hits new low as unions intensify push for higher pay

Eurozone unemployment has hit a fresh record low after the bloc’s labour market weathered the initial fallout from Russia’s invasion of Ukraine, emboldening unions to intensify their push for higher wages.

The jobless rate across the 19 countries that share Europe’s single currency was 6.8 per cent in March, Eurostat said, down from an upwardly revised 6.9 per cent in February. Economists had expected it to fall even further to 6.7 per cent, according to a poll by Reuters.

The continued improvement of Europe’s labour market has prompted unions to step up demands for higher wages to offset soaring energy and food prices, which lifted eurozone inflation to an all-time high of 7.5 per cent in April, squeezing household disposable incomes.

“Let’s be clear, workers are not the cause of inflation, they are its victims,” said Esther Lynch, deputy general secretary of the European Trade Union Confederation. “Pay is at the top of our affiliates’ agenda as inflation is at its highest level for decades and it’s clear that the cost of living is on an upward trajectory.” 

Pay has not kept pace with prices. In the fourth quarter of last year, eurozone wages rose at an annual rate of 1.4 per cent, well below inflation of 4.6 per cent in the period. That caused real hourly wages to fall 3 per cent, the largest drop since comparable data began 14 years ago. Wage growth in the eurozone has also not kept pace with rates seen in the US and UK.

Line chart of hourly earnings in the private sector (rebased, 2015 = 100) showing eurozone wages have lagged behind those of other advanced economies

During the May Day marches by tens of thousands of workers across Europe on Sunday, union leaders stressed their determination to secure higher pay for workers to offset the higher cost of living.

The CGT, the leftwing French union, called for the country’s minimum wage to rise to €2,000 per month, up from €1,645. The minimum wage has been raised three times in the past year, adding up to a total increase of 5.9 per cent, but CGT leader Philippe Martinez told Le Parisien that increasing it further was the best way to address France’s “social malaise”.

IG Metall, Germany’s biggest union, said last week it was considering making a demand for an 8.2 per cent increase in annual wages for 85,000 workers in the iron and steel sector.

The proposal by union officials in the north-west and east of Germany — covering most of the country’s steel industry — is likely to be agreed at a national level next week, kicking off negotiations with employers in the sector, which has been buffeted by surging energy prices.

“Our members rightly expect a significant increase in monthly wages in the face of sharply rising prices and high profits of steel companies,” said Birgit Dietze, a district manager at IG Metall.

Line chart of eurozone unemployment rate (%) showing a sharp recovery in the eurozone labour market

Unemployment in Germany fell 13,000 to 2.31mn in March, which was slightly less than expected but still took its jobless rate to 2.9 per cent, the lowest rate since Eurostat records started in 1991. The country’s employment agency said job vacancies increased by 10,000 to 852,000.

Stefan Schneider, an economist at Deutsche Bank, said Germany’s labour market was “red hot” and the steelworkers’ pay demands were “a reminder that the risk of a price wage spiral in Germany is real and not just the product of inflation angst ingrained in the German DNA”.

Tuur Elzinga, chair of FNV, the biggest Dutch union, said companies in the Netherlands had more than doubled their dividends this year, compared with 2019, but “many kept a tight rein on their own employees”. He added: “This imbalance needs to be tackled.”

The proportion of companies reporting labour shortages rose to a new record of 27.8 per cent last month, according to a European Commission survey published last week. EU companies’ employment expectations dipped slightly, but Jack Allen-Reynolds, at Capital Economics, said they still pointed to a 1.5 per cent rise in eurozone employment this year.

“While there is no sign of wage growth picking up yet, a tight labour market and sky-high inflation are fertile ground for pay,” said Allen-Reynolds. “Even so, real incomes are likely to drop this year and consumption growth will be weak.”

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