The jobless rate in the Eurozone dropped to its lowest point in more than eight years as the economic recovery continues to gather steam throughout the currency bloc, although lower inflation means the European Central Bank (ECB) is still unlikely to change its stance in the short term.
Unemployment fell to 9.3 per cent in April, according to the European Commission. That was the lowest point since March 2009, when the global financial crisis decimated the labour market.
However, the inflation rate moderated after spiking in April, according to the Commission’s preliminary estimates. Consumer prices rose by 1.4 per cent during the year to May, down from the 1.9 per cent annual rate in the previous month.
Meanwhile the core inflation rate, which strips out the effects of volatile food and energy prices, fell back to 0.9 per cent.
Speculation has risen in recent months that the improving economic outlook across the bloc will lead the ECB to consider raising interest rates at its next meeting on 8 June. However, ECB president Mario Draghi this week insisted an “extraordinary” level of stimulus is still necessary.
The ECB’s economists will provide updated forecasts for the Eurozone economy in the coming months, which will help inform the prospects for monetary policymakers to consider announcing the start of tapering of its quantitative easing policy.
Any decision to start withdrawing support will remain dependent on the ECB’s view of the divergence between nations’ economic performances, with Germany surging ahead but unemployment (and particularly youth unemployment) remaining high in other nations.
Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said: “We have never seen a labour market this tight in Germany, and with inflation rising, workers will demand higher nominal wages to compensate.”
However, in Greece unemployment remains at 23.2 per cent, with unemployment among under-25s still at 47.9 per cent.