The eurozone’s labor market appears to have stabilized, official figures indicated Tuesday, another sign that the region’s economy is recovering from its longest-ever recession.
Though Eurostat, the EU’s statistics office, said the unemployment rate across the 17-member eurozone held steady at 12 percent in August, it found the number of people out of work fell for the third month running. That’s the first time the region has enjoyed such a run since April 2011.
In total, the number of unemployed dipped by 5,000 to 19.18 million, triggering hopes that the 20 million threshold that many economists had been forecasting this year will not be struck, and that the 12.1 percent record high booked in June may not be breached.
“The eurozone’s jobless rate is past its peak for the current economic cycle,” said Zach Witton, an economist at Moody’s Analytics. “However, the unemployment rate will fall only gradually as the weak recovery provides limited support to profit margins, giving companies little incentive to boost hiring.”
As usually happens in a recovery, the modest improvement in the labor market has lagged behind the region’s emergence from recession by a few months. The economy grew in the second quarter by a modest quarterly rate of 0.3 percent after contracting for six straight quarters, its longest recession since the euro currency was launched in 1999.
Most surveys suggest the eurozone expanded further during the summer months, and that the growth won’t rely only on Germany, Europe’s largest economy. Even Greece, mired in recession for the best part of six years as the global financial crisis morphed into a crippling sovereign debt crisis, is expected to start growing soon.
Hopes for an improvement in the eurozone economy were supported by a closely watched manufacturing survey released Tuesday.
The purchasing managers’ index for the manufacturing sector — a gauge of business activity published by financial information company Markit — was 51.1 points in September. Though down from August’s 26-month high of 51.4, the survey points to continuing expansion — anything above the 50 threshold indicates growth.
“This is good news for the eurozone, but also for the global economy,” said Chris Williamson, chief economist at Markit. “The downturn in demand caused by the region’s recession and the uncertainty generated by its debt crisis had cast a shadow over economic recoveries across the globe. But we must not get too carried away.”
Over the past three years, the eurozone, which has a population of around 330 million, has been the laggard of the world economy, as it grappled with a debt crisis that at various times threatened the future of the euro currency itself.
Countries across the region, but mainly in the south, such as Greece, Portugal and Spain, have had to enact tough austerity measures to convince bond-market investors that they could get a handle on their public finances. A combination of recession, poor management and expensive bank bailouts had caused public debt to swell in the region.
The problems afflicting the eurozone have weighed on sentiment around the world, putting a brake on the global economic recovery. Though the U.S. unemployment rate has fallen steadily over the past two to three years – to 7.3 percent in August – many economists think the decline would have been steeper were it not for Europe’s problems.
The wider 28-country European Union, which includes non-euro countries such as Britain and Sweden and has a population of a little over 500 million, has also struggled in the wake of the eurozone’s woes in recent years. Here, too, the unemployment rate appears to have steadied, staying unchanged in August at 10.9 percent for the fourth month running.
Olli Rehn, the EU’s commissioner for economic affairs, warned that despite the indications of a rebound, the crisis in the eurozone is not yet over. He said governments should continue their economic reforms and debt cuts, lest they stymie the budding recovery.
He also lamented the shutdown of the U.S. government, but said that he thought the impact on other economies would be limited if it didn’t last very long.
“But, of course, the recovery in the global economy, and also in the European economy, is so fragile that they do not need any new risks or any new elements of political instability,” he told reporters in Paris.
Few economists think the eurozone’s current economic growth is enough to significantly bring down unemployment, particularly among the young. The manufacturing PMI survey, for example, showed companies in the sector were still shedding jobs in September, though at a slower rate than before.
The Eurostat figures also mask huge divergences across the eurozone: While Germany has an unemployment rate of 5.2 percent, Spain’s jobless rate is 26.2 percent. The situation in Greece is even worse, with 27.9 percent of people out of work in June; Greek figures are compiled on a different timeframe.
The situation among the young — that is, potential workers under the age of 25 — is even more acute. For example, over half the youth in Greece and Spain are unemployed. In Greece, youth unemployment stood at a stunning 61.5 percent in June.
As well as being a burden on a country’s coffers, sky-high levels of youth unemployment have the additional social cost of denying potential workers skills and experience. That’s a long-term cost to the region’s economic potential, and has also