Unemployment across the 17 euro countries fell below 10 percent in February for the first time in over a year, official figures showed Friday, in another sign the region is enjoying a fairly sturdy economic recovery despite debt troubles in a number of countries.
Eurostat, the EU's statistics office, said unemployment fell by 77,000 in February, helping to take the rate down to 9.9 percent _ the lowest since December 2009 _ from January's 10 percent. The January rate had previously been estimated at 9.9 percent but was revised up in Friday's report.
Lower unemployment is good for the wider economy as it could help ratchet up Europe's perennially weak consumer spending levels.
Analysts say that's important if the recovery in the eurozone is to step up a gear. So far much of the recovery has been based on booming industrial conditions in Germany, Europe's powerhouse. That's evident in the unemployment rate in Germany, where the unemployment rate dropped to 6.3 percent in February from 6.5 percent in January.
Though falling unemployment is encouraging, Europe's economy faces a number of headwinds, including a rising inflation rate. Figures Thursday showed consumer prices spiked by 2.6 percent in the year to March, way above the European Central Bank's target of keeping inflation at "close to, but below 2 percent.
As a result, the bank is widely expected to raise its main interest rate from the record low of 1 percent at its monthly policy meeting next Thursday. That expectation has in turn pushed up the value of the euro, which could potentially depress growth, too. Though a higher currency may make imported goods cheaper, it's unlikely to be met with much enthusiasm by exporters.
That's a toxic brew for a number of countries still reeling from a debt crisis that shows few signs of abating.
The last thing countries like Spain, which has the eurozone's highest unemployment rate of 20.5 percent, Greece, Ireland and Portugal need are higher borrowing costs and an elevated exchange rate.
"With inflation likely to remain high and wage growth subdued, real labour income will probably shrink this year," said Ben May, European economist at Capital Economics.
"With the spreading fiscal squeeze set to hit households too, we continue to expect household spending in the region as a whole to grow at a sluggish pace and sharp falls in Southern Europe and Ireland are probably inevitable," May added.