Italy Unemployment at Two-And-Half-Year Low Boosts Renzi

  • Joblessness might fall even faster than government estimates
  • More jobs in construction, real estate, less in banking

Italy’s unemployment rate unexpectedly declined to the lowest in two and a half years, signaling the country’s labor market may improve even faster than Prime Minister Matteo Renzi’s forecasts.
Joblessness dropped to 11.9 percent in August from 12 percent the previous month, statistics agency Istat said in a preliminary report in Rome on Wednesday. That was below the 12 percent median estimate of eight analysts surveyed by Bloomberg.
The number is also lower than Finance Ministry estimates released earlier this month which see 2015 unemployment at 12.2 percent, before falling to 11.9 percent next year. Wednesday’s numbers follow a jump in confidence among Italian households and executives earlier this month helping to support Renzi’s claims that his policies have put Italy on a sustainable growth path.
The surveys “showed higher optimism among manufacturers and foretold a positive trend of the activity in the months ahead,” employers lobby Confindustria said in a report on Tuesday.
Employment rose for a third month, with about 69,000 jobs gained in August alone, Istat said. Youth joblessness rose in August to 40.7 percent from a revised 40.4 percent in the previous month, according to the report.

GDP Growth

Unemployment in the euro region’s third-largest economy had been at 12 percent or above since March 2013 and in November reached a record high of 13 percent. The index has since fallen as the country’s longest recession since World War II ended and gross domestic product started expanding again. Earlier this month, the government boosted its economic forecasts with GDP seen expanding to 0.9 percent in 2015 and 1.6 percent next year.
"The improved labor market trend is the result of a combination of factors including better economic conditions and strong policy implementation," said Fabio Fois, European economist at Barclays Plc in Milan. "We expect this trend to continue in the coming quarters."
Renzi has overhauled the country’s labor code with the aim of making firing and hiring easier. The legislation, dubbed ‘Jobs Act,’ which rewards employers who hire people on an open-ended basis with lower social contributions, has caused an increase of such contracts this year.
Italy’s jobless rate remains above the average of the euro region which was unchanged in August at 11 percent, the European Union statistics office Eurostat said in a report on Wednesday. In Germany, the euro bloc’s economic powerhouse, the jobless rate fell last month to 4.5 percent from 4.6 percent in July, Eurostat said.

Banking Woes

Data released by Istat earlier this month showed that in Italy construction and real estate were among the sectors where more jobs were created in the first half. The rise of employment in the financial industry was more contained amid investor concerns about banks’ profitability which is leading many financial institutions to cut workforce to save money.
Banca Popolare di Vicenza, the northern Italian lender that is preparing to sell stock to the public after failing the European Central Bank’s stress test last year, plans to cut 600 jobs and to close 150 branches, newspaper Corriere della Sera said Wednesday, without citing the sources of its information.
Italy’s biggest bank, UniCredit SpA, is considering eliminating another 10,000 jobs in coming years on top of thousands of cuts already carried out, people with knowledge of the discussions said earlier this month. Employees in Italy, Germany and Austria would probably be most affected by the reductions, the people said.

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