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Euro-area companies add jobs as ECB bolsters economic recovery

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Euro-area companies stepped up hiring as manufacturing and services activity from Germany to Spain expanded faster than economists estimated.

[LONDON] Euro-area companies stepped up hiring as manufacturing and services activity from Germany to Spain expanded faster than economists estimated.

A gauge of employment in both industries rose in January to a level not exceeded since mid-2011, data from London-based Markit Economics showed on Wednesday. A Purchasing Managers' Index increased to 52.6 from 51.4 in December, exceeding a Jan 23 preliminary reading of 52.2. Measures for Germany, Italy and Spain signaled accelerating growth, while French output shrank for a ninth month.

The 19-nation euro economy is set to benefit from a decline in oil prices and a weaker euro just as the European Central Bank embarks on a 1.1 trillion-euro (US$1.2 trillion) quantitative-easing program to fight the risk of deflation. Anticipation of large-scale purchases of sovereign debt boosted business confidence in January after unemployment declined for the first time in four months.

The rate of job creation is "adding to signs of increasing optimism among employers about the year ahead," said Chris Williamson, chief economist at Markit.

"The survey data are running at a level consistent with gross domestic product rising by 0.3 per cent in the first quarter, and the move to full-scale quantitative easing by the ECB should help drive even stronger growth in coming months."

The euro-area economy expanded 0.2 per cent in the third quarter, and economists in Bloomberg's monthly survey predict the same rate of growth for the final three months of 2014. Eurostat will release GDP data on Feb 13.

A measure of activity in the service industry rose to 52.7 in January from 51.6 in December, Markit said. That compares with an initial estimate of 52.3. On Monday, a gauge of manufacturing activity was confirmed at 51. A reading above 50 indicates expansion.

A composite PMI for Germany jumped to 53.5 compared with a median forecast of 52.6 in a separate survey of analysts, and a gauge for Spain climbed to 56.9 versus a prediction of 54.6.

Joblessness in the currency bloc fell to 11.4 per cent in December, down from a record 12 per cent recorded in most of 2013. Stubbornly high unemployment fueled the success of anti- austerity party Syriza in Greek elections last month and is seen as a key reason for the support of populist movements from Germany to Spain.

With new orders accelerating and companies' backlog of work stabilizing, the region's labor market might be approaching a turning point, Markit said. The rate of job creation was the fastest in more than 7 years in Spain, and a similar gauge for Germany rose to an 11-month high. At the same time, further job losses were registered in both France and Italy.

"Spain and Ireland are the stand-out performers, both in terms of the pace of economic growth and hiring signaled by the survey data," Mr Williamson said. "The strength of employment growth is particularly encouraging in these countries, providing hope for the rest of the region that unemployment rates could start to fall in earnest in 2015."

BLOOMBERG