Eurozone employment reportedly surged more than expected to a new record high last quarter as a surprisingly resilient economy will avoid the recession. It also points to more significant underlying inflation pressure.

It considered as one which can keep the interest rates high even for a longer time. The eurozone economy is reportedly expected to contract through the winter due to falling energy prices. 

Apart from that, the mild winter and incredible flexibility made things even more chaotic. However, they still propped out the confidence. The actual demand was employment because it exceeded by 0.4% in the quarter.

This is two times higher than predictions and a survey conducted by Reuters. This pushed the total number of workers to 165 million; compared to the final quarter of 2022, this is up 1.5%.

Rapid employment growth highlights just how tight the labour market is. Apart from that, this is also a signal for the ECB problem, which is trying to bring inflation down to 2%. However, what should the central bank do for all digit territories these days?

Euro Zone is Seen Dodging Recession as Energy Crunch Eases

A recession was expected to decrease the jobless rate. Meanwhile, the cooling labour market and keeping a lid on wages provide an ongoing struggle. Appear to be hanging onto the staff even though it's in the downturn zone.

"The resilience of employment growth will aggravate the ECB's worries regarding the second round effects on inflation. In addition, this will reinforce the push for an extension on hiking cycles in March," said Ken Wattret, an economist at S&P Global Markets Intelligence.

Wage growth was already expected to exceed 5% this year, which is the highest value in years. This adds to the underlying pressure, especially in services where wages are the most increased cost. However, it is feared that the growth rate still signals a drop in actual earnings.

"The surprisingly significant increase in terms of employment in employment in the fourth quarter last year is a clear illustration of the euro zone's remarkable resilience. The economy is in the face of various headwinds,” continued Wattrett.

He noted that the overall growth in 2023 is still in the weak category. So from all the current forecasts, it is hoped that the economy will fare better this year compared to the previous one.

The ease of the energy crisis and the labour market holds up are the targets of the European Commission. European Union officials estimated that the increase that occurred this year could reach 0.9%.

This is to avoid the recession. They also cut their projection for summer growth which is predicted to remain high, perhaps in the 5.6% area. 

Meanwhile, the Economy Commissioner from the European Commission said that better than expected economic conditions do not mean good. He noted that the euro economy is still facing a difficult period with slow growth and inflation-only easing.

The European Central Bank Is Still Not Done To Increase Interest Rates

Previously, the European Central Bank hiked its deposit rate by 50 basis points to keep battling inflation. The policymaker claims that this was done to soar inflation due to the impact of Russia. However, the European Central Bank president said this is still ongoing.

Meanwhile, the focus now is on the pound, Euro and US dollar, which can now be traded in highly volatile areas. The latest rate decisions for the Bank of Europe also indicate that the interest rate decision could be sharply lower.

The Bank of Europe or the European Central Bank said that the Euro's appeal has increased, which could be a good start. The threat of the Euro has also been overcome. So now, the European Central Bank will try to maintain the employment rate first.