Seasonally adjusted employment:

4Q 2009: flat q/q, -1.2% y/y

MNI survey median: -0.2% q/q, -1.5% y/y
MNI survey range: -0.3% to -0.1% q/q

4Q 2009: -0.2% q/q (unrevised)
3Q 2009: -0.5% q/q (unrevised)
2Q 2009: -0.5% q/q (unrevised)

PARIS (MNI) – Eurozone employment edged higher in 1Q for the first
time in nearly two years as hiring in business and financial services
and agriculture offset further downsizing in industry and construction,
Eurostat said Tuesday. Most analysts had expected a further decline in
jobs.

While some 2,000 jobs were added in 1Q after a drop of 33,800 in
4Q, seasonally adjusted employment was still down nearly two million or
1.2% from last year at 144.3 million, and nearly four million below the
peak in 2Q 2008.

Quarterly job losses continued in manufacturing (-1.0%) and
construction (-1.5%) but were interrupted in trade, transport and
communication. Gains were registered in financial and business services
(+0.5%), agriculture (+0.2%) and other services (+0.5%), which include
mainly public administration, health and education.

For the near term, leading indicators point to modest job gains in
industry but give mixed signals for other sectors.

The employment component of the composite PMI polls rose from an
average of 48.2 in 1Q to 50.5 in May, surpassing the threshold for
expansion for the first time since June 2008 with modest gains in both
industry (50.4) and the services (50.5).

By contrast, the European Commission’s survey last month showed
hiring expectations eroding in all key sectors except manufacturing,
where a further improvement pulled the index slightly above the
long-term average. Elsewhere, the near-term employment outlook remained
well below average, especially in construction.

While consumers’ job worries continue to ebb slowly, the same
survey shows they remain relatively high, which will no doubt dampen
sentiment and spending for some time.

Some 25,000 more people lost their jobs in April, boosting the
Eurozone unemployment rate to a 10-year high of 10.1%.

While the rise in unemployment has been less steep than feared six
months ago, the upward trend is unlikely to be reversed for some time,
since activity is expected to remain too sluggish to absorb new labor
market participants.

Moreover, a number of countries subsidized reduced working hours
schemes during the recession to protect jobs. This has created an ample
cushion of employees on hand to allow firms to respond to any pickup in
demand.

The European Commission expects Eurozone employment to contract by
another 1% on average this year and begin expanding only marginally next
year. The jobless rate would continue climbing next year to an average
of 10.4%, it forecast last month.

“The relatively limited labor-market adjustment so far, together
with a sectoral reallocation forced by the crisis, suggests a rather
jobless recovery and (potentially persistent) high unemployment ahead,”
it explained.

The OECD is slightly less pessimistic about job losses this year
but expects no recovery in employment on average next year. “Employment
appears to be stabilizing,” it ventured last month.

The lagging labor market recovery should boost labor productivity
and maintain downward pressure on wages, keeping inflation low and
allowing firms to reduce unit labor costs that surged during the
recession. But this will also compress real incomes and weigh on private
consumption well into next year at a time when austerity programs are
throttling activity.

Among the larger economies, only Italy registered higher employment
in 1Q, with a 0.4% upturn that still left a 0.7% decline on the year.

In Germany, where the labor market has held up remarkably well,
employment stabilized in 1Q and was only 0.3% lower on the year.
National statistics showed a seasonally adjusted rise of 38,000 jobs in
April and a 45,000 drop in unemployment in May.

In France, employment also stabilized in 1Q, for a 0.8% decline on
the year. National data showed a quarterly rise in private sector
payrolls of nearly 24,000, the first increase in nearly two years.

In Spain, where the labor market had adjusted fastest to the slump
in activity, employment was also stable in 1Q, giving a 3.6% drop on the
year.

Elsewhere in the Eurozone, quarterly job gains were reported by
Finland (+0.5%) and Austria (+0.1%), losses by Greece (-0.3%), Slovenia
(-0.8%) and Slovakia (-1.1%), and no change in Belgium.

–Paris newsroom +331 4271 5540; e-mail: stephen@marketnews.com

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