Table: Story:

KEY DATA

UNEMPLOYMENT

Oct Sept Aug
EMU-16 9.8 9.8 9.6
EU-27 9.3 9.2 9.1

MARKET REACTION

ECONOMIST COMMENTS

HOWARD ARCHER, IHS GLOBAL INSIGHT:

"In addition to the euro zone's return to growth in the third quarter and improved business confidence, the rise in euro zone unemployment is currently being limited to some extent by government jobs support in a number of countries (most notably in Germany).

"Nevertheless, euro zone unemployment still seems likely to rise significantly higher, thereby weighing down on growth prospects over both the near and medium term. Unemployment is a lagging indicator and the depth and length of the recession that most countries have suffered will continue to impact for some time to come.

"Furthermore, even though the euro zone exited recession in the third quarter and activity is continuing to improve in the fourth quarter, growth is unlikely to be strong enough to generate net jobs for some considerable time to come -- particularly as some of the current government measures to support employment will come to an end.

"Meanwhile, still rising unemployment is likely to limit euro zone consumer spending, especially as it is likely to hold down wage growth. This reinforces the case for the ECB to only very gradually withdraw its emergency liquidity measures, and to keep interest rates down at 1.00 percent until deep into 2010."

JENNIFER MCKEOWN, CAPITAL ECONOMICS:

"October's rise in euro zone unemployment comes as a disappointment after better data from Germany, but at least the rate of increase has continued to ease.

"A fall in German unemployment was offset by further increases in France, Italy and Spain. The consolation is that the rate of increase has slowed markedly since the start of the year and surveys of hiring intentions point to more modest falls in employment to come.

"But, even assuming that unemployment soon starts to fall, wage growth has yet to respond to the earlier pick-up and still looks set to drop sharply in the coming months. In all, then, there is hope that the labour market downturn is coming towards an end, suggesting that consumers might soon start to spend again. But a strong recovery seems unlikely."

LINKS

For further details, Reuters 3000 Xtra users can click on: http://europa.eu.int/comm/eurostat/

For a one-page snapshot of real-time G7, euro zone and Swiss economic data releases, click on Keywords: EUROZONE ECONOMY/UNEMPLOYMENT (Brussels newsroom, tel +32-2-287-6830, fax +32-2-230-5573, e-mail: brussels.newsroom@reuters.com)

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