BRUSSELS: The eurozone’s unemployment rate fell to a historic low in December, official figures showed yesterday, as hiring in Europe rode a solid recovery and shrugged off the explosive spread of the Omicron coronavirus variant. The seasonally adjusted jobless rate stood at seven percent in December, the lowest level since the official Eurostat statistics agency began compiling data in April 1998.

In the 27-member European Union, which includes countries such as Poland not in the single currency bloc, unemployment fell to 6.4 percent in December, also a low since records began. “The eurozone ended 2021 — the year after the worst recession since World War II-with its lowest ever unemployment rate. A testimony to the success of our collective response to this crisis,” said Paolo Gentiloni, the EU economics affairs commissioner. Previously, the lowest unemployment rates for both the 19 countries sharing the single currency and the EU-27 — of 7.2 percent and 6.5 percent respectively-had been recorded in March 2020. Year-on-year, the picture also improved significantly, with a drop from 7.5 percent in the eurozone, equating to 1.8 million fewer people seeking work. The positive development on the labor market represents a marked difference from the eurozone debt crisis, in which the bloc struggled for years to bring unemployment down to pre-crisis levels. EU officials attribute the difference to a radical change in approach in which the EU jointly agreed on a massive spending push at the worst of the crisis, instead of the austerity path chosen in 2010-2015. This would also help explain Europe’s economic burst in 2021, in which the eurozone economy grew by a record 5.2 percent.

Divergences remain

Eurostat said that some 13.6 million people were unemployed in the EU in December, including 11.5 million in the eurozone. Despite the unprecedented low, wide divergences remained across the eurozone with jobless levels ranging from 3.2 percent in Germany to 13 percent in Spain.

France has seen unemployment steadily drop over the past months, but at 7.4 percent, still remains above the eurozone average. Italy’s jobless rate stood at nine percent. Analysts said very low levels of unemployment in certain countries pointed to hiring struggles and could soon spark demands for higher wages. This would weave into the increasingly heated debate over the sharp rise in consumer prices seen in Europe, with bigger paychecks and higher demand adding to the upward pressure. European Central Bank chief Christine Lagarde insists that high inflation is crisis-linked and temporary.

But the ECB will come under further pressure to raise interest rates and cut back on stimulus if wages go up. “There is very little the ECB can do against the current inflation drivers, but once inflation expectations start to move up and wage growth accelerates, a rate hike will no longer be far away,” said Carsten Brzeski of ING bank. A rise in rates would be bad news for the eurozone’s most indebted governments, such as Italy, France, Greece and Spain, as it would put added strain on their budgets. They will back Lagarde in her belief that inflation is a short-term phenomenon and that the eurozone remains economically fragile and needs the ultra-low borrowing price and stimulus. — AFP