EU Jobless Rate Drops to 7%July 4, 2007
LONDON -- Unemployment in the euro zone fell to an all-time low in May, as the bloc's strong economic growth continued to create jobs.
The European Union's statistics agency, Eurostat, said unemployment in the 13 countries that use the euro dropped to 7% in May, from 7.1% in April and 7.9% in May 2006.
Other data suggested that the rate could fall even farther. A survey of euro-zone manufacturing companies published Monday said factories are hiring workers at the fastest pace since October 2000.
"Good times are here for the euro area," the European Commission said yesterday in a quarterly report. "It also looks like good times are here to stay for some time."
It reiterated that the euro zone's economic growth should reach 2.6% this year after 2.7% in 2006, with its expansion increasingly fueled by domestic demand. Inflation appears to be under control, it added.
Indeed, prices of goods leaving the euro zone's factory gates rose at a slightly slower pace in May, Eurostat said, indicating that inflationary pressures are easing. Producer prices rose 0.3% from April and were up 2.3% from May 2006.
But the European Central Bank's Governing Council has warned repeatedly that the rapid fall in unemployment could lead to higher wages, which in turn could lead to a pickup in consumer spending. This, economists say, makes it more likely that the ECB will continue to tighten monetary policy in the coming months, with most predicting at least one more rate rise before the year end.
The ECB raised its main rate by a quarter of a percentage point to 4% in June, its eighth increase since December 2005. Its Governing Council meets again tomorrow, but is expected to leave the rate unchanged for now.
Eurostat estimated that 10.4 million people in the euro zone were unemployed in May 2007. In the European Union as a whole it said 16.4 million men and women were unemployed.
The unemployment rate in the wider 27-nation European Union was also 7% in May, compared with 7.1% in April and 8% in May 2006.
On a country-by-country basis, unemployment was lowest in the Netherlands, at 3.2%, and highest in France, at 8.7%.
French President Nicolas Sarkozy has vowed to boost growth in the euro zone's second-biggest economy. On Monday, he repeated his view that the euro was overvalued and renewed his call for the currency to be used to promote jobs and growth in Europe.
In its report, the commission played down any negative impact from the strong euro on euro-zone exports. "On average, the appreciation remains relatively modest, at about 4% in nominal terms since the beginning of 2006 and has been partly offset by favorable domestic cost developments," the commission said.
ECB Executive Board member Lorenzo Bini Smaghi also defended the way the central bank and ministers share responsibility for the euro, rebuffing calls for finance ministers to have more influence over foreign-exchange policy.
In a speech yesterday, he said the "division of labor" between the ECB and euro-zone finance ministers in the euro zone worked more efficiently than in the U.S. and Japan, where the finance ministry is responsible for currency policy.
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