Eurozone unemployment fell to a historic low in December, official figures showed on Tuesday, as jobs in Europe made a steady recovery and snatched away the explosive spread of the Omicron virus variant.
Seasonally adjusted unemployment was 7% in December, the lowest level since Eurostat’s official statistical office began compiling data in April 1998.
In the 27-member European Union, which includes countries such as Poland that are not part of the single currency bloc, unemployment fell to 6.4 percent in December, also the lowest since records began.
“The eurozone ended 2021 – the year after the worst recession since World War II – with its lowest unemployment ever. A testament to the success of our collective response to this crisis,” said Paolo Gentiloni, EU Economic Commissioner.
Previously, the lowest unemployment figures for both the 19 countries sharing the single currency and the EU-27 – at 7.2 per cent and 6.5 per cent respectively – had been registered in March 2020.
Compared with the previous year, the picture also improved significantly, with a decrease from 7.5% in the euro area, which corresponds to 1.8 million fewer people looking for work.
The positive development in the labor market represents a marked difference from the debt crisis in the euro area, where the bloc fought for several years to bring unemployment down to pre-crisis levels.
EU officials attribute the difference to a radical change in approach where the EU jointly agreed on a massive spending pressure at the worst of the crisis, instead of the austerity path chosen in 2010-2015.
This would also help explain Europe’s economic explosion of 2021, when the eurozone economy grew at a record 5.2 percent.
Differences remain Eurostat said about 13.6 million people were unemployed in the EU in December, including 11.5 million in the euro area.
Despite the unsurpassed low level, large differences remained over the euro area with unemployment rates ranging from 3.2% in Germany to 13% in Spain.
France has seen unemployment steadily fall in recent months, but still remains above the euro area average of 7.4%. Italy’s unemployment rate was nine percent.
Analysts said that very low levels of unemployment in some countries pointed to employment problems and could soon trigger demands for higher wages.
This would weave into the increasingly heated debate about the sharp rise in consumer prices in Europe, with higher wage checks and higher demand contributing to upward pressure.
The Governor of the European Central Bank, Christine Lagarde, insists that high inflation is crisis-bound and temporary.
But the ECB will be under further pressure to raise interest rates and cut stimulus if wages rise.
“There is very little the ECB can do against the current drivers of inflation, but as inflation expectations begin to move upwards and wage growth accelerates, an interest rate hike will no longer be far off,” said Carsten Brzeski at ING Bank.
A rise in interest rates would be bad news for the eurozone’s most indebted governments, such as Italy, France, Greece and Spain, as it would put even more strain on their budgets.
They will support Lagarde in her belief that inflation is a short-term phenomenon and that the euro area remains economically fragile and needs the ultra-low loan price and stimulus.