Eurozone’s unemployment rate falls in October but outlook remains uncertain

Too early to sound the all-clear as second lockdowns hamper business activity

Volunteers carry food packages to distribute to charitable organisations at the food bank in Palma de Mallorca. Strongly impacted by the covid-19 pandemic, Spain registered an increase of more than 25Show more

Eurozone unemployment fell slightly in October with the jobless rate dipping to 8.4 per cent of the workforce from 8.5 per cent the previous month, according to the EU’s statistics agency.

The figure for those in work increased by 86,000, taking the total number of unemployed to 13.825 million, Eurostat said, however, on an annual basis the jobless rate was substantially higher than the 7.4 per cent recorded in October last year as the fallout from the pandemic takes its toll on the economy.

“The Covid-19 outbreak and the measures applied to combat it have triggered a sharp increase in the number of claims for unemployment benefits across the EU,” Eurostat said.

“At the same time, a significant part of those who had registered in unemployment agencies were no longer actively looking for a job or no longer available for work, for instance, if they had to take care of their children.”

The pandemic has dealt a devastating blow to economic activity across the eurozone, with businesses hampered by heightened restrictions to curb the spread of Covid-19.

Although the unemployment rate is improving, Jessica Hinds, Europe economist at Capital Economics, said it is too early “to sound the all-clear” because revised data for the summer months has changed the picture, with more than a million more people out of work in July than previously estimated.

“Unusually big revisions to the back data show that the eurozone labour market was in worse shape over the summer than previously indicated, she said.

“What was also striking is that rather than rising steadily over the summer as the data had previously suggested, eurozone unemployment has been on a downward trend from July’s peak.”

The outlook for the labour market is “particularly uncertain”, she said, with the second lockdown in parts of the eurozone, such as France, taking its toll on businesses.

“Companies’ hiring intentions still point to employment falling in year-on-year terms. So we would not be surprised to see the number of people out of work creeping back up over the winter months, before gradually falling again later next year,” she said.

The picture was less rosy when looking at individual countries, with Italy’s unemployment rate edging up to 9.8 per cent in October from an upwardly revised 9.7 per cent the month before, with about 13,000 jobs lost, according to national statistics bureau Istat.

The number of people registering as jobless in Spain edged up by 0.66 per cent in November from a month earlier with registered job seekers rising by 25,269, leaving 3.9 million people out of work, the Labour Ministry data showed.

However, with much of Spain hit by a fresh series of restrictions linked to the second wave of the pandemic, the government was relieved that the news was not worse.

The 0.66 per cent increase, "which is lower than the average for the last 12 years, shows that flexibility measures have cushioned the impact of the second wave," Labour Minister Yolanda Diaz tweeted.

Unemployment has become a devastating consequence of the pandemic for countries across the globe, with the jobless rate hitting 4.8 per cent in the UK in the three months to September, and expectations it will reach 7.5 per cent by the middle of next year.