Italy’s labour demand developments were in line with expectations, with a sharp employment fall offsetting a shrinking labour force to leave the unemployment rate changed……
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By Raj Badiani, Senior Economist, IHS
According to the national statistical office, total employment retreated by 0.3% between April and May to stand at 22.33 million people.
The fall in labour demand in May is a timely reminder that net job creation intentions remain fragile, with firms under pressure to limit their workforces when faced with a still soft domestic market conditions and intensely competitive trading conditions.
Specifically, employment has fallen in three of the first five months of 2015, while being unchanged in one of the remaining two. Meanwhile, seasonally adjusted unemployment rate remained at 12.4% in May, and was lower than 12.6% in March, while the statistical agency reports that youth (aged 15–24) unemployment was unchanged at 41.5% during May.
The mixed labour market data in May continue to highlight the near-term risks, particularly with the economy just managing to break free from yet another recession from the closing stages of 2014. Italy returned to moderate growth in the first quarter of 2015, but it was a poor return from converging supportive external factors, further illustrated by unbalanced contributions to first quarter growth.
Critically, recent consumer confidence surveys signal that Italian households’ perceptions of near-term job security are the major concern. Indeed, firmer consumer confidence in June was due to a less pessimistic view of future unemployment developments, with the index measuring this falling by 20 points to 9, and was in line with better than expected labour demand developments during April. Clearly, a less daunting unemployment rate in both April and May will help to ease these concerns, which is critical given the recovery profile assumes that consumers are better placed to raise their spending levels during 2015 and 2016, increasingly attracted by generous pricing and boosted by recovering real incomes. But with unemployment still being volatile and uncomfortably high, the consumer spending upturn is likely to be at a gentle pace at first.
Importantly, with Italy just about clambering out of recession in late-2014, alongside still disrupted credit markets and challenging labour developments, households are likely to remain guarded at first about spending on non-essential items. Poor labour market developments could offset the favourable external backdrop, extinguishing the recovery spark in Italy during 2015, with the country lagging behind as growth accelerates across the single currency region. Such an outcome would bring to even sharper focus on the structural impediments sitting on Italy’s growth potential, and ramp up the pressure on Italy to deepen its labour market reform drive.
Source: BONDWorld.it
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