The ECB belatedly moved to catch up with markets last week. Recent inflation surprises have forced the central bank to change track. Labour market recoveries have been swift, particularly for some nations that have struggled with perennially high structural unemployment for decades.
Spain stands out: national data for January showed that registered employment increased 71.9k to a record 19.914m (Spanish Ministry of Labour, Migration & Social Security). The unemployment rate declined to 13.0% at the end of 2021 according to separate Eurostat data, the lowest since October 2008.
Private payroll employment has also risen to record levels in France, up 106.7k q/q in Q4 to 20.041m (INSEE). At the end of 2021, private payroll employment exceeded its pre-crisis level by 1.5% (or +297,300 jobs). The jobless rate across the Eurozone fell to 7.0% at the end of 2021, a record low for the currency bloc.
Three-month ahead price expectations for the Eurozone services sector firmed again in January despite Omicron, according to the latest EC survey.
The rise in global bond yields is concerted. But yield curves are flattening across the world too, notably in the Eurozone and in the UK. Real household incomes are being squeezed: the public are not going to get behind a green energy transition if it means taking a sharp hit to their living standards.
The costs associated with climate change have not been adequately considered. The green energy transition will be expensive, and prices will become more volatile. Unfortunately, due to Covid, governments have much less fiscal space to deal with these critical issues.
