The eurozone witnessed a return to record lows in unemployment rates in August, indicating a tight labor market that continues to drive wage growth and inflation. According to data from the European Union statistics agency Eurostat, the jobless rate in the bloc stood at 6.4% during the month – a figure that aligns with economists’ expectations.
Eurostat’s revised figures show a slight decrease from the previous month’s rate of 6.5%. The current unemployment level matches the record low achieved in June, following a steady decline after reaching a peak of 8.6% in August 2020 during the height of the Covid-19 pandemic, which severely impacted the economy and labor market.
The data reveals that over 100,000 fewer people were unemployed in the eurozone in August compared to July. Youth unemployment also saw a slight decline from 13.9% to 13.8%.
These figures indicate that the eurozone job market continues to face a shortage of workers, a trend that has contributed to the rise in wages and subsequent services inflation in the 20-member currency union.
However, inflation unexpectedly cooled off, reaching 4.3% in September, according to recent Eurostat figures. This suggests that the European Central Bank’s efforts to regulate the economy through higher interest rates have started to bear fruit.
The lower-than-anticipated inflation reading raises the possibility that the latest rate hike by the ECB, where the key deposit rate was increased to 4.0%, may mark the end of the current cycle. This assumption holds true, especially if unemployment begins to rise from its current levels.