By Ed Frankl
The eurozone's jobless rate edged higher in February, coming off a record low at the start of the year, ahead of the inflation shock and uncertainty prompted by the conflict in the Middle East.
Unemployment in the 21-nation currency area rose to 6.2% in February, from the all-time low of 6.1% in January, the European Union's statistics agency Eurostat said Wednesday.
Joblessness broadly held steady across the bloc, slightly up in Italy, marginally down in Spain, while unchanged in France and Germany.
However, the war in Iran and the ensuing rise in inflation caused by soaring energy prices, could threaten firms' hiring or ability to hold onto staff.
A more timely survey of the eurozone's manufacturing companies, also published Wednesday, by S&P Global said employment was reduced at an accelerated rate in March.
The unemployment rate will be a key pivot for the European Central Bank as it calibrates its policy response in the coming months, Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said in a note.
Policymakers will need to be attentive to accelerating wage demands should the jobless rate remain low, which would support the ECB raising rates regardless of the underlying damage to the economy, he said.
Inflation expectations have already risen sharply after the blockage of the Strait of Hormuz sent energy costs higher. Eurozone inflation climbed to 2.5% in March, above the ECB's target, from 1.9% in February.
ECB rate setters will be concerned about being too slow to tighten monetary policy should higher oil-and-gas prices mean workers demand and get higher wages to cover their higher energy bills, leading to companies raising the prices of goods and services they provide.
The central bank said last month it expects the unemployment rate to average at 6.3% in both 2026 and 2027, before falling back to 6.2% in 2028.
Write to Ed Frankl at edward.frankl@wsj.com
(END) Dow Jones Newswires
04-01-26 0638ET
