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The eurozone's unemployment rate has risen from record lows, unexpectedly rising to 6.5% as high interest rates and economic stagnation begin to take a toll on the region's job market.
The number of unemployed people in September rose by 69,000 from the previous month, bringing the total for the 20 euro member countries to just over 11 million, the EU's statistics agency Eurostat said on Friday.
The European Central Bank halted a series of rate hikes last week and is closely monitoring the job market for signs of weakening and slowing wage growth, a key driver of recent inflationary pressures.
“We are seeing the first signs that the labor market is softening,” ECB board member Isabel Schnabel said in a speech on Thursday before the statistics were released. “However, the slower this process unfolds and the weaker it is, the greater the risk that a prolonged tightening of the labor market will undermine the assumptions underlying the expected decline in core inflation.”
Economists polled by Reuters forecast that the unemployment rate will rise at a record low of 6.4% in September, marking the beginning of a decline in the eurozone job market after years of steady recovery. There is. The ECB expects unemployment in the euro zone to rise to 6.7% next year as the slowing growth outlook forces employers to cut jobs.
Klaus Vistesen, an economist at consultancy Pantheon Macroeconomics, said: “Gross domestic product (GDP) is weakening and survey data suggests that companies are starting to cut jobs, especially in manufacturing, making it difficult to predict the future. Looking ahead, we believe that unemployment in the euro area will rise further in the coming months.”
Unemployment in the region has nearly halved since peaking at 12% in 2013, when the region's debt crisis left millions out of work. It briefly rose in 2020 when pandemic lockdowns brought the economy to a halt, but the furlough scheme cushioned the blow and unemployment has continued to fall since then, despite a slowdown in activity over the past year.
Growth in the euro zone has stalled this year as high inflation, a sharp rise in ECB interest rates and a weak global economy have hurt economic activity. Regional GDP for the three months to September shrank by 0.1% from the previous quarter.
The EU survey found that the proportion of companies citing labor shortages as a constraint on production fell in all sectors last month, but in some sectors companies' hiring intentions fell below the long-term average.
Some companies hit by the drop in demand have given up on making improvements over the next one or two years and have begun cutting back on staff. German steel distribution company Klöckner announced this week that it would cut about 300 jobs, or 10% of its European trading operations.
“We think wage growth will slow over the next few quarters,” said Bradley Saunders, an economist at research group Capital Economics, adding that vacancy rates in Europe will decline and job listings on Indeed's website decline. pointed out that “in Germany and France, the number is on the decline.''
The ECB expects wages per employee in the euro area – the committee's preferred measure of wage growth – to rise by 5.3% this year, well above the level at which inflation would reach its 2% target. There is. However, wage growth is expected to slow from the second half of this year, falling to 3.8% in 2025.
