Labor market improving
FRANKFURT – Eurozone labor markets, beset by high unemployment, are showing some signs of improvement while wage growth remains subdued, European Central Bank Governing Council member Nicholas Garganas told Reuters. However, the ECB would not hesitate to raise interest rates should signs emerge that wage settlements were no longer restrained, he said in an interview. «There are some indications that the labor markets are improving,» said Garganas, who is also Governor of the Bank of Greece. October employment data could show a strong increase, he said, although he noted that hiring always lags behind economic recovery. «We would expect labor demand to improve further in the year ahead,» he said in the interview, conducted at a meeting of G10 central bankers in Basel, Switzerland, on Monday. Unemployment is shrinking slowly in the eurozone, reaching 8.4 percent in September from a downwardly revised 8.5 percent in August, the lowest rate since October 2002. Business surveys also show that layoffs are abating. A strengthening labor market often emboldens trade unions to demand larger wage rises, something the ECB has warned it will not tolerate. High wage growth would be enough to trigger its first interest rate rise in five years, it has signaled. The European Trade Union Confederation, which represents 60 million workers and meets with ECB officials on Tuesday to discuss the economic outlook, has said wage growth is under control and that it only wants increases in line with productivity. So far, Garganas said there are no signs of growing wage pressures. ECB chief economist Otmar Issing said last month there was anecdotal evidence of wage pressures, but Garganas said he sees no widespread problem. «I have looked very carefully at wage development this year and up to the second quarter, and there are some indications for the third quarter. These (data) suggest that wage growth remains subdued in the euro area as a whole. (There are) some increases here and there, but overall they (wage pressures) remain subdued,» he said. Garganas credited the ECB’s strongly worded warnings to employers and trade unions with playing a part in restraining wage settlements to date. However, he cautioned against complacency on the wage front. «People should know that if the situation changes, we would not fail to act. That was made quite clear.» ECB data show that total hourly labor costs rose at a 2.3 percent annual rate in the second quarter, compared with 2.5 percent in 2004. Negotiated wage growth was flat at 2.1 percent in the same period, matching the 2004 gains.