LONDON – The buoyant economic recovery across the 19-country eurozone has pushed unemployment down to its lowest level in nearly nine years but inflation remains subdued, official figures showed Thursday.
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Eurostat, the European Union’s statistics agency, said the jobless rate fell to 8.8 percent in October, from 8.9 percent the previous month. That’s the lowest since January 2009, when the region, like the world economy, was reeling from the global financial crisis and the ensuing deep recession.
Across the region, there were 14.34 million people out of work, down 1.5 million in the past year. That’s clear evidence that the economic recovery, which has gathered momentum during 2017, has invigorated the jobs market, especially in some of those countries that saw the biggest spikes in unemployment after the financial crisis. That’s especially true in Spain, which for much of the past few years lumbered under the weight of an unemployment rate of around 25 percent. Now, following strong growth, unemployment has fallen to 16.7 percent.
Though the eurozone is growing strongly, inflation is not rising as anticipated.
Eurostat said its headline measure of consumer price inflation was 1.5 percent in November. While up from October’s 1.4 percent, it was below expectations in markets for a rise to 1.6 percent.
It means that inflation remains below the European Central Bank’s goal of just below 2 percent, a level it considers healthiest for the economy. Over the past few years, the ECB has enacted a series of stimulus measures, including cutting its main interest rate to zero, in the hope of getting inflation back up to target. Recently it eased up on its bond-buying stimulus program, which aims to keep market interest rates low, amid mounting evidence of economic growth. However, it’s still concerned that underlying inflation has yet to pick up strongly.
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That’s evident in the core rate of inflation, which strips out volatile items like food, energy, alcohol and tobacco. The rate in November was stuck at 0.9 percent — again below expectations of a rise to 1 percent.
The subdued core rate suggests that wages are not growing quickly despite the fall in unemployment.
ECB President Mario Draghi has said there are a number of reasons why that might be. He said it’s possible that after years of low interest rates and low inflation wage negotiators may have been focused more on keeping jobs than on securing higher pay.
However, he said, that these kinds of factors are likely to be “transitory” and the recent “remarkable” increases in employment should start to show in a rise in nominal wages. With spare capacity in the economy diminishing, the hope is that a pick-up in wages that can support consumer demand and give inflation a boost.
