The jobless rate in the Eurozone fell to its lowest level in nearly four years in October, as more and more of the region’s economy put the crippling debt crisis behind it.
However, the rate of improvement slowed markedly, as the labor markets in both Spain and Italy, two of the best performers in the single-currency bloc all year, appeared to run out of steam.
The European Union’s statistics agency Eurostat said that there were 17.24 million unemployed in the 19 countries that share the single currency in October, down by 13,000 from September, giving a seasonally-adjusted jobless rate of 10.7%. The last time it was this low was January 2012.
However, it’s still more than twice the jobless rate in the U.S., and also compares badly to non-Eurozone countries in the E.U. like Britain, Denmark, the Czech Republic and Poland.
And economists note that there is still a dark side to the news–one familiar to the U.S.’s largely jobless recovery from the Great Recession.
Italy’s government was proud to tweet about another 13,000 drop in the jobless rolls. However, Vincenzo Scarpetta, a policy analyst at the think-tank Open Europe, pointed out that the number of people actually in work in October (the last month for which data are available) fell by 39,000, while another 32,000 left the workforce, either through retirement, or by ceasing to look for work. That means that the country now has fewer people in work than it did in April.
With Germany enjoying effectively full employment, and Spain’s jobless rate now over 5 percentage points down from its peak of over 26%, all eyes this year have been on Italy, where Prime Minister Matteo Renzi has slowly put flesh on the bones of the plan he outlined last year to get the country back to work.
Together with an easing in bank credit conditions and extraordinarily low interest rates from the European Central Bank, Renzi’s labor market reform has brought the jobless rate down from over to its lowest in three years after peaking at over 13% of the workforce, mainly by introducing new labor contracts that give much-reduced labor protection rights for three years, and giving tax breaks to companies that hire people on those contracts.
Scarpetta points to two main problems in getting that number down further. Firstly, the new contracts need to be extended to the public sector. Secondly, he says, the government still needs to get Italy’s miserable growth rate up.
“You can adopt as many new labor laws as you like, but employers won’t hire as long as they don’t think things are getting better,” Scarpetta said.
Italy’s economy contracted for six successive quarters in 2013-14 as a wave of job losses and insolvencies crippled a weak banking sector’s ability to offer credit. It has expanded for the last three quarters but growth slowed to only 0.3% in the three months to September.