Eurozone unemployment fell by 105,000 in January to stand at 16.647 million, which is the lowest level since October 2011. The unemployment rate came down to 10.3% in January, which is down from a peak rate of 12.1% in April 2013.
IHS perspective | |
Significance | Given a recent stream of largely disappointing news on the Eurozone economy, it is at least relatively encouraging to see the number of jobless come down by a decent 105,000 in January to be at the lowest level since October 2011. Of course, it remains to be seen if Eurozone unemployment can keep falling given a recent softening in business confidence and stuttering growth. |
Implications | The marked overall drop in Eurozone unemployment through to January, together with deflation/negligible inflation, should be supportive to consumer spending, which will hopefully allow it to play a key role in helping Eurozone growth regain momentum after stuttering recently. |
Outlook | IHS expects the Eurozone unemployment rate to trend down gradually further to 9.9% at the end of 2016 and 9.5% at the end of 2017. |
Seasonally adjusted Eurostat data show that Eurozone unemployment fell by 105,000 in January to stand at 16.647 million, which is the lowest level since October 2011. Among the major individual Eurozone countries, there were drops in January in the number of jobless in Spain (60,000), Germany (21,000), and the Netherlands (14,000). The number of unemployed was flat in both France and Italy.
January's drop of 105,000 in the number of Eurozone unemployed was up from a decline of 51,000 in December, which had been the smallest fall since May 2015. The overall drop in Eurozone unemployment does appear to have moderated recently, which ties in with Eurozone GDP growth slowing to 0.3% quarter on quarter (q/q) in both the fourth and third quarters of 2015 from 0.4% q/q in the second quarter and 0.5% q/q in the first.
Overall, there was a drop of 306,000 in the number of Eurozone unemployed in the fourth quarter of 2015, which followed a record drop of 564,000 in the third quarter. There were declines of 289,000 in the second quarter and 312,000 in the first quarter.
Unemployment has come down as the Eurozone has seen growth in a 0.3–0.5% q/q range since the third quarter of 2014 and business confidence has generally trended up. Indeed, overall business confidence in December 2015 was at its highest level since mid-2011, although it dipped in January.
At 16.647 million in January 2016, the number of Eurozone jobless was down by 2.665 million from the record high of 19.312 million seen in April 2013. Notably, the number of Eurozone jobless has come down by 1.880 million over the 14 months since November 2014. However, this overall drop in Eurozone unemployment needs to be seen in the context that the number of jobless had previously risen by 3.586 million to the April 2013 peak of 19.312 million, from a low of 15.726 million in April 2011, as the Eurozone suffered six successive quarters of mild GDP contraction from the fourth quarter of 2011 to the first quarter of 2013.
Eurozone unemployment rate down to 53-month low of 10.3% in January
The Eurozone unemployment rate dipped to 10.3% in January, which is the lowest level since August 2011. It is down from 10.4% in December, 10.5% in November, 10.6% in September, 11.0% in June 2015, 11.4% in December 2014, and a record high of 12.1% in April 2013.
The jobless rates in individual countries during January ranged from a low of 4.3% in Germany to a high of 20.5% in Spain, according to Eurostat data (which can vary significantly from national statistics). Cyprus recorded an unemployment rate of 15.3%, followed by Portugal (12.2%), Italy (11.5%), Latvia (10.4%), Slovakia (10.3%), France (10.2%), Finland (9.4%), Lithuania (9.0%), Slovenia (8.9%), Ireland (8.6%), Belgium (7.9%), the Netherlands (6.5%), Austria (5.9%), Luxembourg (5.8%), and Malta (5.1%). The latest comparable data show unemployment rates of 24.6% in Greece during November 2015 and 6.3% in Estonia in December.
Employment rising
The most recent hard data from Eurostat show that Eurozone employment rose for a seventh successive quarter in the third quarter of 2015, and by a relatively solid 0.3% q/q. This followed growth of 0.4% q/q in the second quarter and 0.2% q/q in both the first quarter of 2015 and the fourth quarter of 2014. Eurozone employment was up 1.1% year on year (y/y) in the third quarter, which was up from growth of 1.0% y/y in the second quarter, and 0.9% y/y in both the first quarter of 2015 and the fourth quarter of 2014.
Labour market outlook
IHS expects Eurozone unemployment to trend down relatively gradually over the coming months, with sharp drops unlikely. There are also likely to be varying performances across countries.
With the Eurozone recently struggling for growth momentum and companies in several countries wary of just how robust growth will be over the longer term, the upside for employment will likely be limited. Firms are aware of how difficult and costly it can still be to shed labor in some countries, which could deter them from taking on new workers unless they are convinced that there will be sustained, decent growth.
Eurozone unemployment should continue to fall, as the cyclical economic upturn continues and business confidence is relatively decent in most countries. IHS expects GDP growth to edge up from 1.5% in 2015 to 1.6% in 2016 and 1.8% in 2017. Meanwhile, overall Eurozone business confidence across the Eurozone is well above its long-term averages, according to the European Commission, even though it fell back markedly overall in January/February amid heightened global economic uncertainties after reaching its highest level since mid-2011 in December.
Reflecting still reasonably elevated confidence, the European Commission reported that employment expectations among services companies reached an eight-year high in January, although they fell back in February. Employment expectations were also still well above long-term norms for manufacturers despite falling back appreciably overall in January/February from a more than four-year high in December.
Consequently, the Eurozone unemployment rate is seen falling to 9.9% by end-2016 and to 9.5% by end-2017.