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Eurozone Unemployment Rate Decreases In October

By Arthur Greene December 1, 2016
jobs

Eurozone unemployment rate declined to the lowest in more than eighty- seven months in October, reflecting strong momentum in the labor market despite weak economic growth.

The Eurozone unemployment rate declined to 9.8% for October from a revised 9.9% for September, which was originally reported as 10.0% and was also lower than the consensus forecast of 10.0% for the month.

Most countries in the currency union saw a decline in unemployment, though the rates vary greatly. Germany's jobless rate was 4.1 percent while Portugal's was 10.8 percent. Greece had a rate of 23.4 percent in August, the latest month for which figures were available.

"Improving labor 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," IHS Global Insight economist Howard Archer said.

However, Capital Economics economists said the Eurozone unemployment data showed that the labor market recovery has regained some pace. But the rate of unemployment is still high and recent developments are consistent with pretty slow wage growth.

The number of unemployed decreased by 178,000 from the previous month to 15.908 million. Compared to a year ago, unemployment fell by 1.124 million.

However, the youth unemployment that applies to those under 25 years of age held steady at 20.7 percent in October.

The steady decline in unemployment will underpin short-term confidence in the economic outlook and will also help support near-term trends in consumer spending, especially as consumer confidence has increased to the highest levels of 2016.

The overall improvement shows the region's economy is improving, albeit gradually. The European Central Bank has been pumping 80 billion euros a month into the economy to boost business activity. Next week, it is expected to extend that program beyond its current end date of March.

There will still be concerns surrounding very high unemployment rates in the weaker economies as structural vulnerabilities continue. There will also be concerns that the ECB will find it increasingly difficult to sustain a very expansionary monetary policy if unemployment rates in Germany decline much further given the risk of overheating, which will cause major concerns within the Bundesbank

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By Arthur Greene December 1, 2016

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