Danske Research Team expects the second estimate of euro area GDP growth for Q4 2025 to confirm a small rise in employment in the same quarter. The estimate should show how much employment changed in the final quarter of 2025.
National data suggest a mixed picture. Employment rose sharply in Spain, but fell slightly in France and Germany.
Based on this, Danske forecasts euro area employment growth of 0.1% quarter-on-quarter in Q4 2025. This points to small job gains alongside a cooling labour market.
The article says it was produced with the help of an artificial intelligence tool and reviewed by an editor.
The final data from late 2025 confirmed our view that the labour market is cooling. Euro area employment rose only 0.1% in the fourth quarter. The slowdown came from weakness in core economies like Germany and France, even as Spain held up better. This economic standstill creates a fragile backdrop as we move through the first quarter of 2026.
January inflation fell again to 2.5%. This reduces pressure on the European Central Bank to keep rates high. We see traders removing the chance of more rate hikes and starting to position for possible cuts in the second half of the year. This could support strategies like receiving fixed on interest rate swaps or buying futures that benefit if rates fall later in 2026.
For equity index derivatives, the flat growth outlook suggests limited upside for the EURO STOXX 50. The VSTOXX volatility index has recently dropped to 14, a low level that suggests complacency despite weak data last year. With volatility cheaper, it may be a good time to buy protection, such as out-of-the-money put options, against a potential downturn.
The gap seen last year—Spain’s labour market outperforming Germany’s—is a trend we expect to continue. Derivatives traders may consider relative value trades, such as going long Spanish indices and short Germany’s DAX. This can be done with futures or option spreads to focus on the performance difference between the two economies.
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