Labour market data published last week confirmed that, in contrast to their counterparts in the US, euro-zone firms continued to lay off workers at the end of last year. Timelier indicators suggest that the divergence in labour market performance has widened since then. The likely contrast between the future performance of the euro-zone and US labour markets, coupled with the fact that the euro-zone banking system remains in a fragile state, supports our view that the euro-zone economy may contract this year and next while the US expands.
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