Eurozone unemployment falls below 10% – analysts react

Posted on December 1, 2016

A milestone.

Unemployment in the eurozone has fallen into the single digits for the first time since the bloc’s debt crisis erupted in 2010.

Now at 9.8 per cent, the jobless rate was deemed to have dropped below 10 per cent in September, according to revised figures compiled by Eurostat, underscoring the single currency area’s steady progress in bringing down unemployment as it continues on a moderate economic recovery. At its height, unemployment climbed over 12 per cent in 2013.

October’s 178,000 drop in unemployment was spread across the 19-country bloc, falling in Germany, France and Italy.

But for all the improvement, the single currency remains divided by record low jobless in Germany (4.1 per cent) and is still at eye-watering levels in Greece (23.4 per cent) and Spain (19.2 per cent).

“The labour market is a lagging indicator in the eurozone, and it likely will continue to fall in the coming three-to-six months”, said Claus Vistesen at Pantheon.

“Divergence between the major economies remains a key story, however, and the rate also is still much higher than before the financial crisis”.

Eurozone unemployment is still far above its long-term average of 8.8 per cent, notes Daniel Christen at Capital Economics, adding:

Looking ahead, survey evidence suggests that employment growth in the eurozone as a whole is more likely to slow than accelerate. The employment index of the Composite PMI is broadly consistent with annual employment growth of about 1.0 per cent, slower than Q2’s 1.4 per cent.

With the eurozone facing a series of key votes starting next Sunday and encompassing three of its largest economies (Germany, France, Italy) in the next 12 months, threats to growth and unemployment still loom on the horizon.

“Heightened political uncertainty could weigh down on business confidence and lead to increasing caution over employment and investment”, said Howard Archer at IHS Markit.

“Improving labour markets are key if eurozone consumers are to make a solid contribution to growth over the coming months, especially as gradually rising inflation is likely to eat into purchasing power over the coming months”, he said.

Chart courtesy of Bloomberg

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