Euro zone unemployment is higher than official data suggest, continuing to keep wage growth muted, a European Central Bank study showed on Wednesday, raising fresh doubts about whether the bank can start rolling back its stimulus measures soon.
Wage growth has been unexpectedly weak for a bloc that is enjoying its best economic run in a decade and the ECB has argued that better wage dynamics are needed for the inflation rebound to become sustainable, a key condition for cutting back stimulus.
Explaining the apparent disconnect between the rapid unemployment drop and weak growth in pay, the ECB said headline jobless figures exclude people who fail to meet strict statistical criteria and also exclude part time workers seeking more hours, even though both groups add to labor market slack.
Once adjusted for these categories, the labor market slack is around 15 percent, well above the official 9.5 percent unemployment rate and only Germany appears to be displaying signs of labor market tightness.
“In France and Italy, broader measures of labor market slack have continued to increase throughout the recovery, while in Spain and in the other euro area economies, they have recorded some recent declines, but remain well above pre-crisis estimates,” the ECB bulletin article said.