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Eurozone Unemployment Resumes Drop, Remains High

3 Apr 2017 9:00 am
By Paul Hannon 

Falls in the numbers of people without work in Italy and Spain drove a decline in the eurozone's unemployment rate to its lowest level since mid-2009 in February, chiming with other signs that the currency area's modest economic recovery accelerated slightly in the early months of 2017.

The European Union's statistics agency Monday said the unemployment rate across the 19 countries that use the euro fell to 9.5% from 9.6% in January, reaching its lowest level since May 2009. The number of people without work fell by 140,000 from January, as the number of jobless Italians dropped to 2.98 million from 3.06 million, and the number of jobless Spanish to 4.09 million from 4.13 million.

The eurozone's unemployment rate has been falling steadily, if slowly, since the eurozone economy returned to growth in mid 2013. However, unemployment rates in southern Europe are still very high, with Italy's clocking in at 11.5% in February, and Spain's at 18%. Overall, the eurozone's jobless rate was more than double its U.S. equivalent.

For many of the European Central Bank's policy makers, very high levels of unemployment are a key reason for remaining cautious about removing the stimulus they are providing to the recovery in an effort to hit their inflation target.

In recent months, ECB President Mario Draghi has stressed that a pickup in wages is key to a sustained rise in consumer prices at close to 2%. Higher wages can boost inflation in two ways. With more money to spend, workers can bid up prices of goods and services, while businesses paying higher wages often raise their prices to cover their increased costs and maintain their profit margins.

But with so many Europeans looking for work, their bargaining power is set to remain weak, while consumer spending is unlikely to strengthen significantly. Figures released Friday showed the annual rate of price rises fell to 1.5% in March from 2% in February, a sign of how transitory pickups in inflation can be without wage rises.

Write to Paul Hannon at paul.hannon@wsj.com
 

(END) Dow Jones Newswires

April 03, 2017 05:00 ET (09:00 GMT)

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