Dip in euro zone unemployment raises hopes of recovery

The euro zone, which has been in the news for years due to massive joblessness and rampant youth unemployment, might be turning a corner.

According to new figures for June, there was a slight decline in the number of jobless people across the region, even as the unemployment rate remained steady at a record high of 12.1 per cent.

As against the earlier month, there were 24,000 fewer people looking for work across the 17-nation region, Eurostat data showed. Though this was not much of a change in the grand scheme of things, it certainly was a start, according to commentators.

Howard Archer, chief European economist at IHS Global Insight, said the dip in unemployment in June was likely a reflection of recent increased signs that euro zone economic activity had stabilised and it fueled hopes that the euro zone could manage to show marginal growth over the second half.

"Even so, we doubt that June marks a decisive turnaround in euro zone labor markets and we suspect that unemployment will trend modestly higher over the coming month," he said in a research report.

The unemployment rate in the euro zone had remained at the record 12.1 per cent for the past four months, and in April unemployment was reported to have hit 12.2 per cent, which was later revised down by Eurostat.

However, the fall in euro zone joblessness was not enough to lower the overall unemployment reading for the bloc, which remained at a record 12.1 per cent for the fourth straight month.

The number of unemployed people in June stood at 19 million.

Retail sales in Germany, Europe's largest economy, were down by the most this year in June, dropping 1.5 per cent, even as French spending was down in the month from May and missed expectations of a rise.

In Spain, retail sales were down for the thirty-sixth month running in June with only 39 fewer people out of a job in the month as against May in a country where the unemployment rate was second only to Greece in the wider EU at 26.3 per cent.

Meanwhile, talk of a recovery has picked up with euro zone business and economic sentiment indices rising to a 15-month high in July, helped by the European Central Bank's pledge to support the euro zone, as also a recovering US economy coupled with a lessening of harsh austerity policies.

A headline of Commerzbank research note last week said, "Recession is probably over". Also Europe was beginning to grab the attention of investors who were looking to the euro zone and the UK to take over a stock market boom in the US and Japan following double-digit gains there this year.