Eurozone labor cost growth slows in Q1 2026 as Italy sees unemployment drop

Eurostat reported that the euro area’s hourly labor cost rose 3.2% year‑on‑year in the first quarter of 2026, a slowdown from 3.6% in the same quarter of 2025. Wage earnings increased by 3.4%, while non‑wage components rose 2.9%.

In Italy, the labour market showed further improvement: total employment rose by 67,000 to 24.207 million, lifting the employment rate to 62.7% and pushing the unemployment rate down to 5.3%, its lowest level in years. The number of inactive persons aged 15‑64 grew modestly, while part‑time employment fell slightly to 28.8% of jobs. Labour‑cost per full‑time equivalent rose by 1.2% quarter‑on‑quarter, driven by higher wages and social‑security contributions.

Analysts see the slower rise in labour costs as a potential signal for monetary‑policy considerations, while Italy’s stronger job creation may support domestic demand.