The unemployment rate in the eurozone has fallen to a new record low of 6.5 per cent after the biggest drop in jobless numbers for almost a year.
The 142,000 reduction in jobless people across the single currency zone in October was the largest fall since November 2021. But economists predicted the labour market would soon weaken because of the energy shock caused by Russia’s invasion of Ukraine.
“Leading indicators suggest demand for labour is now waning,” said Melanie Debono, an economist at research group Pantheon Macroeconomics.
Companies are scaling back their hiring intentions and signalling a likely slowdown in employment growth, according to recent business surveys, including ones by the European Commission and data firm S&P Global Market Intelligence.
Franziska Palmas, an economist at research group Capital Economics, predicted any rise in unemployment was likely to be “much less than in previous recessions and to remain low by past standards”, due to widespread labour shortages and the cushion of short-time work, or furlough, schemes.
In October, the unemployment numbers fell in Germany, Spain and Italy, while remaining flat in France, according to figures published by the EU’s statistics arm on Thursday. In the wider EU, there was a 107,000 reduction in jobless people, taking the unemployment rate down to 6 per cent.
However, in November the German labour market’s gains went into reverse, with a 17,000 increase in the number of unemployed people to 2.43mn along with a reduction in the number of vacancies, according to data released on Wednesday by the country’s federal employment agency.
“Overall, the labour market is stable,” said Daniel Terzenbach, regional head of the agency. “Unemployment and underemployment have risen again after seasonal adjustment and short-time work is increasing again, but employment is growing significantly.”
The European Central Bank is concerned that an economic downturn could increase unemployment, which combined with high inflation and a sharp rise in interest rates is likely to cause more people to have problems repaying debt.
Andrea Enria, chair of the ECB’s supervisory board, which oversees the biggest eurozone lenders, told lawmakers on Thursday that while the overall ratio of banks’ non-performing loans had been falling, there were increases “in the consumer loans segment and early arrears, both for households and corporates”.
Some banks were using “relatively mild macroeconomic assumptions” in their models, Enria said, warning that ECB supervisors would “closely scrutinise capital planning and challenge management actions to ensure an appropriate level of conservatism”.
In Italy, Thursday’s data from the national statistics agency showed employment among women lagged behind their male counterparts and remained at the bottom of the EU rankings, highlighting the challenges facing the country’s first female prime minister Giorgia Meloni.
The employment rate for Italian men edged up 1.7 percentage points over the year to 69.5 per cent in October but for Italian women it rose at a slower pace of 1.4 percentage points to 51.4 per cent.
“The lack of family-friendly policies, low career expectations, subdued growth and high pay gaps drag heavily on female participation [in Italy],” said Nicola Nobile, economist at the consultancy Oxford Economics.
