Euro area unemployment ticks lower in July, possibly emboldening ECB, says Pantheon Macroeconomics

Unemployment in Europe's single currency area slipped in July, possibly emboldening the European Central Bank to focus on inflation, some economists said.

According to Eurostat, in seasonally adjusted terms, the rate of unemployment in the euro area ticked lower by a tenth of a percentage point in July to reach 6.6%.

July's reading was in line with economists' forecasts.

However, readings for May, June and July were also revised up by a tenth of a percentage point to 6.7%.

That compared to unemployment of 7.7% in July 2021.

In absolute terms, euro area unemployment decreased by 77,000.

From among the euro area's largest economies, unemployment in Germany and Spain were unchanged from the month before at 2.9% and 12.6%, respectively.

In France and Italy on the other hand it ticked lower by a tenth of a percentage point to 7.5% and 7.9%, respectively.

Meanwhile, in the Netherlands, it increased from 3.4% to 3.6% and in Austria from 4.2% to 4.6%.

Commenting on the latest data, Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said the influx of refugees from Ukraine was keeping German unemployment from rising in line with the national claims rate.

Yet in overall terms he described the numbers as "solid", adding that they would "embolden the ECB to focus squarely of still-high inflation over the next few months.

"Survey data suggest that the rate of improvement in the labour market is now slowing, and we still think unemployment will increase slightly in the next six months as GDP falls. It won't rise by much, however, and risks are tilted towards a more positive outcome."