LIVE MARKETS-The great euro zone employment split is good for the ECB

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THE GREAT EURO ZONE EMPLOYMENT SPLIT IS GOOD FOR THE ECB

ING economists have a good note out on Wednesday flagging the sharp geographical divide in the euro zone labour market.

Spain, Greece, Portugal and Italy have seen fairly large declines in unemployment since 2023 (0.8 to 2.26 percentage points), while Germany, Australia, the Netherlands and Belgium have seen their unemployment rates creep up.

It's not news to make you drop your breakfast marmalade, southern European economies are growing fast, and northern ones, less so, but it has some positive implications.

"In the past, the ECB’s one-size-fits-all monetary policy quickly reached boundaries due to diverging economic trends across the euro zone," they write.

"With the current convergence and monetary policy at the verge of turning accommodative, the new convergence is a blessing – it could bring some relief for suffering northern economies, without doing any harm in the south."

They also say it's worth keeping an eye on the differences within regions.

While Greece, Spain and Portugal are all seeing higher productivity and failing unemployment, Italy's lower unemployment is coming with negative productivity growth.

"Businesses are relying more on labour for output. For the short run this is positive as it boosts Italian household incomes, but given its weak demographic profile, the question remains as to whether this is sustainable. "

(Alun John)

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