Euro-Area Unemployment Falls

Euro-area unemployment decreased to a new five-year low in December, an unexpected bit of good news as the European Central Bank considers increasing its monetary stimulus next month to stave off deflationary threats.

The region’s jobless rate decreased to 10.4 percent from 10.5 percent in November, the European Union’s statistics office in Luxembourg said on Tuesday. That’s the lowest since September 2011. Economists forecast the rate to remain unchanged, according to the median estimate in a Bloomberg survey.

“The job market outlook in a nutshell is quite robust,” said Frederik Ducrozet, an economist at Banque Pictet in Geneva. “For the ECB it will have little influence on the very near-term decision, in my opinion. It’s more for the medium-term debate.”

Central bankers around the world are reaching into their armories in response to market tumult at the start of the year stemming from an emerging market slowdown and commodity slump. ECB President Mario Draghi said in January that the Governing Council will review its stimulus policies in March as collapsing oil prices risk pushing the region’s inflation rate back to zero.

Inflation hasn’t been near the ECB’s goal of just under 2 percent in almost three years. European sentiment indicators weakened in January in response to the global market turmoil, with Markit Economics’s Purchasing Managers Index declining and the European Commission’s index of economic sentiment dropping to its lowest in five months.

While the ECB forecasts euro-area unemployment will average 10.5 percent this year before dropping to 10.1 percent in 2017, Executive Board member Benoit Coeure on Monday called on governments to step up reforms.

“For the recovery to become structural, and thus to increase growth potential and reduce structural unemployment, monetary policy does not suffice,” he said.

Bloomberg

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