• GDP expansion may be too low to support strong job creation
  • Youth joblessness little changed in February at 39.1 percent

Italy’s unemployment rate rose in February as a discount on social contributions for businesses hiring more workers was being phased out, stripping job creation of a key boost with economic growth failing to accelerate.

The jobless rate increased to 11.7 percent from a revised 11.6 percent in January, national statistics agency Istat said Friday in Rome. The median estimate in a Bloomberg survey of six analysts called for 11.5 percent.

Italy’s gross domestic product probably rose 0.1 percent in the first quarter, the same as in the final three months of 2015, Istat said in a March 9 statement. This year, the third-largest economy in the euro region will avoid a recession though its growth will be slower than previously forecast, a Bloomberg survey of 25 analysts showed last month. A limited GDP rise would fail to support robust job-hiring as some key drivers are set to come to an end during 2016.

Under a measure passed by Prime Minister Matteo Renzi, companies hiring last year benefited from a discount on employer-paid social contributions of as much as 8,060 euros ($9,174) annually for each open-ended contract.  The tax break has been reduced for contracts signed this year as the program comes to an end.

However, employers lobby Confindustria said Wednesday that industrial production might have gained pace in the first quarter as the executives in Italy’s manufacturing industry grew optimistic about the economic outlook. Rome-based Confindustria added that employment is likely to keep rising in line with GDP growth.

There were 97,000 fewer people employed in February, Istat said Friday. Youth joblessness was little changed during the month at 39.1 percent, Istat said in the report. The statistics agency originally reported the unemployment rate at 11.5 percent for January.

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