Euro area: Labour market strength and gradual cooling – Danske Bank

Danske Research Team highlights that Euro area unemployment fell to a record-low 6.1% in January, mainly in Italy, Spain and France, which could be seen as hawkish for the ECB. However, they expect only a gradual decline in unemployment in 2026 as labour demand cools, while Southern Europe, especially Spain, should still see employment growth alongside moderate PMI-based expansion.

Record-low jobless rate with moderated outlook

"In the euro area, unemployment fell to a record-low 6.1% in January from 6.3% in December, with a decline of 184k unemployed, primarily in Italy, Spain, and France."

"While this signals a hawkish tilt for the ECB, frequent revisions to the data suggest caution in interpreting the sharp drop."

"We anticipate a more gradual decline in unemployment in 2026 as labour demand has cooled, though employment growth is likely to continue in Southern Europe, particularly Spain."

"Meanwhile, the final euro area PMI for February confirmed 51.9, with services slightly revised up to 51.9 and manufacturing steady at 50.8, signalling moderate growth."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)