December preliminary: 10.0%

MNI survey median: 10.1%
MNI survey range: 10.0% to 10.1%

Previous: 10.0% Nov (10.1%), 10.1% Oct, 10.0% Sep, 10.0% Aug, 10.0% Jul

PARIS (MNI) – The Eurozone unemployment rate was unchanged in
December, as nearly all analysts had expected, but at November’s
downwardly revised rate of 10.0%, according to seasonally adjusted data
released Tuesday by Eurostat.

After a downturn of 68,000 in November (almost double the initial
estimate), the number of jobless fell by another 77,000 in December.

While unemployment may have passed its cyclical peak, there is
little reason to expect a pick-up in hiring strong enough in the coming
months to bring down unemployment significantly. This will weigh on
wages and consumption in the Eurozone for some time.

Since the recession ended officially over a year ago, employment
has stagnated. Over the course of last year unemployment rose by a net
178,000 to nearly 15.8 million in December. Among those under 25, more
that one in five (21.0%) was without work.

The jobless rate rose last year in most Eurozone countries except
France, the Netherlands, Finland, Belgium, Malta and, of course,
Germany. The most recent trends show the beginning of a decline in
Spain, Italy, Portugal and Ireland as well.

Those are the countries — along with Austria, Slovenia and Cyprus,
but excluding Spain, Portugal, and Ireland — where unemployment is
below the Eurozone average. In most cases, these are also countries
where growth prospects promise more progress on the labor front than in
those where fiscal consolidation has preeminent priority.

Since tighter fiscal policies will have more immediate impact on
labor markets than structural reforms, the European Commission’s outlook
from last autumn for a mere 0.3% recovery in employment this year and a
0.1 decline in the jobless rate are unlikely to improve with its updated
projections this spring.

Shorter-term indicators are not very promising either. The PMI
polls point to a loss of momentum in job gains over the last three
months. The Commission’s latest business survey signaled improved hiring
prospects in industry, the services and construction, but the contrary
in the retail and financial services sectors.

In Spain, where the meltdown in employment has been the most
dramatic, over two million jobs were lost last year. Still, the jobless
rate fell back 0.2 point in both November and December to end the year
at 20.2%. Youth unemployment also eased 0.2 point in December to 42.8%.

If the worst is probably over in Spain, and industry employment
should benefit from global demand, any stabilization in the services
jobs is uncertain “given the weak domestic demand expected in coming
quarters,” Natixis analyst Jesus Castillo wrote this week. “Job
creations will remain extremely sluggish and in any case insufficient to
have a significant impact on the unemployment rate.”

Italy’s jobless rate jumped stabilized in December at 8.6% after a
0.1-point downturn in November, despite a further rise in youth
unemployment to 29.0%. Last fall the Bank of Italy argued that the
official figure underestimated the true jobless rate by at least 2.5
points if the jobless covered by the redundancy fund “cassa
integrazione” were included.

Istat’s latest surveys of Italy’s main business sectors point to
little change in hiring prospects in industry and the services and a
modest erosion in retailing. Employers’ outlook for building
construction deteriorated markedly, but recovered for civil engineering
and specialized construction.

In France, the unemployment rate was also unchanged at 9.7% for the
seventh month in a row. This stability is at odds with the large monthly
fluctuations in the headline number of jobseekers registered by the
national employment agency, which showed a rebound of more than 48,000
in the last two months of the year.

The PMI polls for France suggest that new hiring has slowed to a
near standstill in recent months. Sector surveys point to a
stabilization of personnel in most key sectors, which would mean a pause
in downsizing in industry and construction. A further moderate expansion
of employment is expected in the services, but only for temporary hires.

The lion’s share of new jobs is likely to be concentrated in
Germany, where the unemployment rate was steady at 6.6% for the fourth
month in a row but still 0.8 point lower on the year. National data for
January showed a further 0.1-point decline, thanks to a drop of 13,000
in the seasonally adjusted number of jobseekers. Job vacancies rose by
another 16,000 after +10,000 in December.

The Ifo institute’s employment barometer for Germany rose to a new
series high in January thanks to the dynamism of industry.

–Paris newsroom +331 4271 5540; e-mail: stephen@marketnews.com

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