Eurozone unemployment falls to lowest since 2009

7 years ago - Published in Finance, Fundamental Analysis

The eurozone's unemployment rate has fallen to its lowest level in more than eight years, but the annual rate of inflation is unchanged, new data showed Monday, highlighting the challenge at the heart of the European Central Bank's decision on dialing down its stimulus programs.

The European Union's statistics agency said the proportion of workers without jobs across the 19 countries that use the euro fell to 9.1% in June from 9.2% in May, reaching its lowest level since February 2009. But consumer prices were just 1.3% higher in July than a year earlier, as the rate of inflation was unchanged, at its lowest level in 2017.

The number of unemployed people in the eurozone fell to 14.7 million in June, a decrease of 183,000 from May, when the seasonally adjusted unemployment rate stood at 9.2 per cent.
Greece continued to have the highest unemployment rate in the 19-country eurozone and European Union as a whole with 21.7 per cent in June, which is down from 22.5 per cent in May.
The lowest rates of unemployment were recorded in the Czech Republic at 2.9 per cent, Germany 3.8 per cent and Malta 4.1 per cent.

The ECB believes the unemployment rate underestimates the degree to which eurozone businesses can increase output without pushing up wages, because many of the jobs created in recent years are part-time, with employees working fewer hours than they would like. Mr. Draghi has estimated that 18% of the eurozone's workforce is either unemployed or underemployed.

Another factor that may be holding back pay rises is that workers are basing their demands on the experience of recent years, which is of very modest price increases and in some periods, price declines.

Mr. Draghi has noted that some changes to labor laws that the central bank believes are desirable in the long run may be limiting wage increases.

"Today's upside surprise in core inflation is likely to give the ECB some comfort, even though its level remains low," Morgan Stanley economist Daniele Antonucci said. "We expect a QE tapering announcement this autumn."