Eurozone’s unemployment rate fell to a record low of 6.4% in November, despite GDP growth being almost stagnant for the year to that quarter. Over the year, the unemployment rate has consistently fallen, a phenomenon largely credited to the strong services sector that has performed well even as the manufacturing sector has struggled. The trend towards shorter work hours and an increasingly tight labor market due to demographic factors have also contributed to the decrease in unemployment.

The employment expectations index in the European Commission’s survey slightly increased in December, with improvements in services and construction sectors but stagnation in retail and a slight decline in manufacturing. Overall, weak industrial labor market conditions seem concentrated in the industrial sector, with the rest of the market remaining robust.

The lower unemployment rates are raising questions for the European Central Bank, especially about the impact on inflation and the potential slow-down of the Eurozone economy due to decreasing labor supply. Sheds light on the potential forecasting challenges facing the ECB.

This analysis was prepared by ING, and while it provides insights, it does not constitute investment advice or suggestions.