Lagarde: Europe's labor market resilient as inflation falls

European Central Bank President Christine Lagarde told policymakers at the Federal Reserve’s Jackson Hole symposium on Saturday that Europe’s labor market has proved unexpectedly resilient after a period of soaring inflation and aggressive interest rate adjustments, with employment rising 4.1 percent between late 2021 and mid‑2025. Lagarde said inflation has fallen sharply and at a “remarkably low cost in terms of employment,” a development that has allowed policymakers greater flexibility as they assess the next steps for monetary policy.

Lagarde said the employment expansion was nearly as large as economic growth over the same period and roughly twice what conventional rules of thumb would have predicted. She attributed the stronger‑than‑expected outcome to a mix of global and domestic factors that eased earlier supply constraints, a steep fall in energy prices, proactive fiscal measures, delayed wage responses to inflation, a reduction in hours worked and an expansion in labor supply. “By understanding the sources of recent resilience, we can be better prepared for the next shock, whatever shape it may take,” she said.

While welcoming the labor market’s performance, Lagarde...