The European labor market is starting to cool, which is worrying as it could lead to below-par investment and growth, European Central Bank policymaker Mario Centeno said on Friday.
Inflation in the euro zone was under control, he also said.
Markets are betting that the ECB will have to speed up interest rate cuts with its next move seen on Oct. 17 because inflation dipped under 2% last month while the 20-nation currency bloc is skirting a recession.
Speaking at a conference in La Toja, Spain, Centeno said: “The issue of growth in Europe is central…and we are now beginning to see the first doubts in the labor market.”
He said the job openings that European companies are creating are 20% less than two years ago, the number of people newly hired by companies is 10% below the maximum seen in the second quarter of 2022, “which coincidentally was when the ECB started raising interest rates.”
“The dynamics of the labor market are cooling down a little and these are the first numbers that should worry us,” he said.
This could already signal a lower level of investment while the current ECB forecast points to the same level as in 2023 for the next two years.
“At this point in the economic cycle, it is not possible for an economy the size of the euro area to consider its (growth) future without investment,” he said.
Centeno said “inflation is under control” and the ECB “has to be very good at communicating” that the decisions taken today are to achieve a 2% inflation in the medium term and the path of interest rate-setting needs to be predictable.
(Reporting by Sergio Goncalves and Andrei Khalip; Editing by Angus MacSwan)
