Christine Lagarde, President of the European Central Bank (ECB), assessed that the European labor market has demonstrated remarkable resilience despite inflation and interest rate hikes.
According to Bloomberg News on the 23rd (local time), President Lagarde stated at the Federal Reserve's economic policy symposium held in Jackson Hole, Wyoming, USA, that "European employment increased by 4.1% from the end of 2021 to the middle of this year," adding, "The European labor market has shown remarkable resilience in the face of recent inflation shocks and aggressive interest rate hikes." The employment growth rate in Europe is almost identical to the economic growth rate and is about twice as high as predicted by traditional economic theories.
She further analyzed, "Favorable global economic conditions and the strengths of the domestic economy have contributed to these results," and explained, "The slow response of wages to inflation has fueled employment growth, which has led to reduced working hours and an expanded labor supply." President Lagarde added that understanding the causes of this resilience would help better prepare for future shocks.
However, President Lagarde pointed out, "There is a high possibility that demographic changes will continue, which could result in ongoing labor hoarding," and cautioned, "Since this could put pressure on labor productivity, it is difficult to be certain that the recent pattern will continue in the future."
The ECB has sharply raised interest rates over the past few years to respond to surging consumer prices. The ECB kept its deposit rate unchanged at 2% in July and is expected to maintain this rate next month. President Lagarde did not provide an outlook on interest rates at the event.
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