Buoyant employment could mean ECB interest rates stay higher for longer

'Resilience of employment growth will aggravate the ECB’s worries about second round effects on inflation and reinforce the push for an extension of the hiking cycle beyond March' economist says

Quick employment growth highlights just how tight the labour market is and signals a problem for the European Central Bank in its fight to bring inflation back to 2% from double digit territory last autumn.

Employment levels across the eurozone surged more than expected to a new record high as a surprisingly resilient economy avoided a recession, pointing to greater underlying inflation pressures that could keep interest rates high for longer.

The eurozone economy was expected to contract through the winter months but falling energy prices, a mild winter and unexpected flexibility in the economy propped up confidence, limiting damage for the currency bloc that still faces a difficult 2023.