Seasonally adjusted employment:

3Q 2011: -0.1% q/q, +0.2% y/y

MNI survey median: flat q/q
MNI survey range: -0.2% to +0.2% q/q

2Q 2011: +0.2% q/q (revised from +0.3%)
1Q 2011: +0.1 q/q (unrevised)
4Q 2010: +0.1% q/q (unrevised)
—

PARIS (MNI) – Eurozone employment slipped unexpectedly in 3Q, as a
big drop in construction hiring and declines in most of the service
sector — particularly real estate — offset a slight pick-up in
manufacturing, Eurostat said Thursday.

Employment decreased by 170,000 or 0.1% in 3Q to about 146.9
million. This was still 543,000 above the trough in the first quarter of
2010, but nearly 3.3 million fewer than at the pre-crisis peak in the
first quarter of 2008.

Across sectors, payrolls plummeted by 1.2% in the both the real
estate and construction sectors, by 0.5% in agriculture and fishing, and
by 0.4% in the information and communication sector. Employment also
diminished in financial and insurance activities, slipping 0.1% compared
to the previous quarter.

Conversely, the 0.1% q/q rise in manufacturing payrolls lifted
overall industry employment up by the same magnitude in 3Q. Employment
in administration and other public services also grew by 0.1%, while in
trade, transport and accommodation services it was unchanged.

Germany contributed the most to the active working force among the
larger Eurozone states with a 3Q gain of 0.2%, followed by both France
and the Netherlands at +0.1% each. After stabilizing in 2Q, Spanish
employment resumed a downward path, falling 0.9% in 3Q. No data were
available for Italy, though 2Q figures showed a 0.3% rise.

Outside of the big five states, the strongest gain was posted in
Estonia (+1.9% q/q), followed by Austria, Slovakia and Belgium (all
+0.3%). Conversely, Slovenian employment continued to fall (-0.5%).
Portugal (-0.3%), Finland (-0.2%) and Malta (-0.1%) also lost ground. No
results were available for Greece, Luxembourg or Cyprus.

At the same time, the number of people without work rose in 3Q by a
net 355,000 to 16.2 million, Eurostat reported earlier. October brought
a further increase of 126,000, and the trend is likely to accelerate as
economic activity loses further steam.

Outside the most dynamic Eurozone economies, employers will
hesitate before expanding payrolls, given the mounting uncertainties
about future demand. Hiring prospects have been eroding in recent months
and were below average in November in all main sectors except in
industry and retail, according to the European Commission’s surveys.

The PMI polls have also signaled a gradual slowdown in payroll
gains since spring. Employment in November was practically flat in both
industry and the services.

The European Commission expects employment growth “to grind to a
halt” next year and pick up again in 2013 with a gain of 0.3% that would
be just enough to roll back a 0.1-point rise in the jobless rate to
10.1% next year.

“With the expected slowdown ahead, firms are set to put hiring on
hold, as is already reflected in their deteriorating employment
expectations,” the Commission explained in its October economic outlook,
adding that a temporary decline in hours worked was likely.

Professional forecasters surveyed by the ECB in October hiked their
projection for Eurozone unemployment next year by half a point to 10.0%
but still expected a 0.3-point decline in 2013.

In the meantime, the prospect of an extended period of sluggish
economic activity has cast an ominous shadow over the labor market.

Last month the OECD forecast a 0.3% decline in employment next
year, more than retracing this year’s recovery, and a pick-up of 0.2% in
2013. The jobless rate would jump 0.4 point to 10.3% next year and
remain there in 2013.

“The unemployment rate will edge up, perhaps more than projected
given the limited adjustment observed in recent years during the
financial crisis,” the OECD said.

A deterioration of the labor market in most Eurozone countries
would add to social outlays and make deficit cuts more difficult without
further cutbacks in jobless benefits. Wage gains will remain subdued and
probably lag inflation for a while, leaving little leeway for a recovery
in consumption.

Even in Germany, where there are signs of labor shortages in some
sectors, pay accords so far this year have been remarkably moderate in
light of the wage restraint of past years. Fiscal consolidation and
sub-par growth will weigh on pay in peripheral countries.

In its most recent monthly bulletin, the ECB noted a number of
surveys, including the PMIs and the Commission polls, pointing to
slowing employment growth over the second half of this year.

“The improvements in labour market conditions that took place up to
mid-2011 have come to a halt,” the central bank said.

–Paris newsroom +331 4271 5540; email: ssandelius@marketnews.com

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