The euro area unemployment rate fell to the lowest level in more than four years in January despite sluggish economic growth and weak confidence.
The jobless rate came in at 10.3 percent in January, down from 10.4 percent in December, data from Eurostat showed Tuesday. This was the lowest since August 2011. It was forecast to remain at 10.4 percent.
The number of unemployed persons decreased by 105,000 from the previous month to 16.647 million. Compared to the previous year, unemployment fell 1.445 million.
Although unemployment among youth aged below 25 dropped slightly, it remained at an elevated level. The youth unemployment rate slid marginally to 22 percent from 22.1 percent in December.
Jack Allen, an economist at Capital Economics, said despite January’s decline, the euro-zone’s unemployment rate remains too high to generate meaningful inflationary pressure. The European Central Bank has a lot more work to do if it is to stand any chance of hitting its inflation target in the medium term, Allen said.
Official data showed Monday that Eurozone consumer prices declined for the first time in five months in February and at the fastest pace in a year, adding to the deflation worries of the European Central Bank, which is widely expected to announce another round of stimulus next week.
The ECB’s rate-setting body, the Governing Council, is scheduled to hold its next policy session on March 10. ECB President Mario Draghi has said that the bank will not hesitate to act in March if downside risks to price stability prevail.
Even though unemployment has been coming down quite rapidly, it is unlikely that this will result in stronger wage growth in the near term, Bert Colijn at ING Bank, noted. There is still simply too much slack in the market for this to happen, as the natural rate of unemployment is estimated to be at around 9.5 percent, the economist said.
The Purchasing Managers’ survey from Markit Economics today showed that manufacturing activity growth eased to a 12-month low in February. Job creation in the currency bloc was registered for the eighteenth consecutive month, but the rate of increase in staffing levels eased to a 12-month low.
With factory output in the eurozone showing the smallest rise for a year in February, concerns are growing that the region is facing yet another year of sluggish growth in 2016, or even another downturn, Chris Williamson, chief economist at Markit, said.
Williamson said the survey will add pressure on the ECB to act quickly and aggressively to avert another economic downturn.
The EU28 unemployment rate dropped to 8.9 percent in January, the lowest since May 2009, from 9 percent in December.
Data from the Federal Labor Agency today showed that Germany’s unemployment declined for the fifth consecutive month in February. The number of people out of work decreased 10,000 from January as economists had expected.
The unemployment rate held steady at 6.2 percent, the lowest since German reunification. The rate also matched economists’ forecast.
Elsewhere, Italy’s unemployment rate logged a surprise decline at the start of the year, preliminary data from the statistical office ISTAT showed Tuesday.
The jobless rate fell to 11.5 percent from a revised 11.6 percent in December. Economists had expected the figure to remain unchanged at December’s original rate of 11.4 percent, which was a three-year low.
Meanwhile, the youth unemployment rate, which applies to the 15-24 group, climbed to 39.3 percent from 38.7 percent.
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